Singapore state investment company Temasek Holdings said Monday it acquired 5% of Repsol SA for 1.04 billion euros ($1.35 billion), as part of a strategy to increase its exposure to the energy sector.
The share sale further boosts Repsol's balance sheet, following an agreement last week to sell most of its liquefied natural gas assets to Royal Dutch Shell PLC for $4.4 billion in cash, plus the assumption of $2.3 billion in debt.
Repsol, the Spanish oil group, is selling off assets and paying down debt as it strives to protect its investment-grade credit rating, which was hurt by the nationalization of its controlling stake in Argentine energy company YPF SA last year. Its credit rating is on the brink of junk status.
The deal announced Monday builds on an existing stake to make Temasek the fourth-largest shareholder in Repsol, with a total holding of 6.3%. Spain's Caixabank SA is Repsol's largest shareholder with a 12.98% stake. Mexican national oil company Petroleos Mexicanos and Spanish construction firm Sacyr Vallehermoso SA hold stakes of around 9.5% each in Repsol.
It is the Singaporean fund's largest investment in Spain to date and one of its biggest in the energy sector. Temasek, which owns a $157 billion securities portfolio, doubled the size of the energy sector in its portfolio to 6% in the year to March 2012.
The energy sector is a good proxy for the needs of transforming economies with growing middle-income populations, both of which are part of Temasek's investment approach, said Tay Sulian, managing director of investment at Temasek. "We will continue to look for good, long-term investments in the energy space," he said.
The share sale represents "important international backing of our growth strategy," said Repsol Chairman Antonio Brufau.
Monday's deal allows Repsol to unwind a transaction it had made in December 2011 when it used its own cash to purchase a 10% stake from Sacyr, a debt-laden builder that was being forced by its creditors to cut its stake in Repsol from 20% to raise cash.
The 64.7 million Repsol shares sold Monday were bought by Temasek at EUR16.01 each. Repsol had sold the other 5% it acquired from Sacyr to several institutional shareholders in January 2012 at EUR22.35 apiece. Since then, Repsol's shares have declined because of the YPF nationalization.
P.R. Venkat in Singapore contributed to this article.
Copyright (c) 2012 Dow Jones & Company, Inc.
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