Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Will Repsol Really Buy Talisman Energy?

It emerged on Tuesday evening that Spain's Repsol  (NASDAQOTH: REPYY  )  was looking at making a takeover offer for Talisman Energy (NYSE: TLM  ) . At first, these were just rumors. However, after Talisman's stock surged on Wednesday morning, the company came out and revealed that it had in fact been approached by Repsol and the two companies were indeed locked in negotiations.

Looking for growth
Repsol has had a tough few years, as the company's international expansion plans have fallen apart. The company's largest acquisition outside of Spain, a key part of international growth, was the $15 billion acquisition of Argentina's YPF SA in 1999. Unfortunately, Repsol's stake in YPF was snatched back during 2012, when the Argentine government nationalized a 51% stake in the company.

Argentina eventually paid Repsol for its stake in YPF earlier this year. The government paid the Spanish oil company $5 billion in bonds for the 51% share that it grabbed. Repsol sold these bonds and the remaining 12% stake it owned in YPF for a total of $6.3 billion earlier this year.

With an acquisition cost of $15 billion, it would appear that, excluding dividends, Repsol made a significant loss on this transaction.

Nevertheless, with the $6.3 billion received from YPF, plus the $7.1 billion Repsol had in cash and equivalents at the end of the second quarter, the company has a hefty war chest with which to go on an acquisition spree.

Still, having had its fingers burnt within Argentina, Repsol is now looking to invest within safer, developed economies. The company has said that it is willing to spend up to $10 billion on deals, probably in the U.S., Canada, or other developed markets, such as northern Europe.

Looking for a sale
Talisman meanwhile is looking to shrink and has many assets that could be attractive to Repsol. Indeed, Talisman generates about half its sales from stable economic regions, like North America and the North Sea; output from Southeast Asia is also a strong contributor to sales. Additionally, Talisman has been shedding non-core assets to pay down debt for the past year or so.

The company's most recent asset sale was supposed to be its Eagle Ford joint venture. While this deal did fall through, (offers came in lower than expected) Talisman is on the war path again. The company has just hired Miro Advisors Pty to sell its stake in oilfields off northern Australia. 

Response to speculation
Talisman has responded to speculation that Repsol was looking to buy the company. In a statement issued on Wednesday morning the company stated:

Talisman acknowledges that it has been approached by Repsol with regards to various transactions. There is no assurance that any transaction will be agreed. Until such time as it is appropriate to make a public announcement on any potential transaction, Talisman does not intend to make any further comment on this matter.

But with an enterprise value of $14.4 billion, Talisman may be too big for Repsol's budget, especially as the Spanish giant has stated that it is only looking to spend $10 billion. It's more likely that Talisman will sell a selection assets to Repsol, allowing the European major to pick and choose the best bits.

Foolish summary
So in conclusion, Spanish oil giant Repsol has approached Talisman with regards to various transactions. This could mean that Repsol is either looking to buy Talisman piecemeal, or some parts of Talisman which it finds attractive. As of yet, no deal has been announced.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3041390, ~/Articles/ArticleHandler.aspx, 8/31/2015 11:57:22 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rupert Hargreaves

Rupert has been writing for the Motley Fool since December 2012. He primarily covers tobacco and resource companies with a passion for value-oriented investments. .

Today's Market

updated 2 hours ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 3:59 PM
REPYY $14.52 Down -0.26 -1.76%
Repsol YPF, S.A. (… CAPS Rating: *
TLM $0.00 Down +0.00 +0.00%
Talisman Energy, I… CAPS Rating: **