NEW YORK (The Deal) -- Spain's Repsol effectively ended its 15-year association with YPF (YPF - Get Report) on Wednesday, May 7 when it sold an 11.86% stake in the Argentine oil and gas producer for $1.26 billion, raising funds for a planned $10 billion acquisition spree.
Repsol said in a stock market filing that it sold the stake to Morgan Stanley & Co. LLC, netting a $622 million profit on the deal and leaving it with a holding of less than 0.5% in YPF. Repsol is unable to sell the remaining stake as it is the subject of legal proceedings.
The "widely expected sell down by Repsol provides it cash for acquisitions and [is] positive for YPF as this [share] overhang is now removed," wrote analysts at Tudor Pickering Holt & Co. Repsol sold the stake, which was held in the form of American security deposits, for $26.91 per share, a 4.5% discount to Tuesday's close of $28.18, according to the note.
The sale comes two months after Repsol accepted Argentine bonds with a face value of $6 billion in compensation for a 51% stake in YPF, which was repatriated in May 2012. That payment is due to be made in dollar denominated bonds, maturing between 2017 and 2033, which Repsol will be free to sell at any time for a maximum of $5 billion. The bonds will pay about $500 million a year in interest.
Repsol's executive Chairman Antonio Brufau has said he plans to spend as much as $10 billion on oil and gas producing assets in OECD countries to offset production lost along with Repsol's stake in YPF. Analysts have tipped North America, the U.K. and Norway as the most likely destinations for Repsol's investment.
"The realization of material cash will add to expectations that Repsol may be near reinvesting proceeds in acquisition opportunities," Deutsche Bank AG analysts noted Wednesday.
Argentine President Cristina Fernandez de Kirchner ordered the nationalization of YPF in 2012 amid allegations that Repsol had failed to invest in YPF's activities leaving Argentina short of oil and gas. Repsol denied the claim, linking the seizure to YPF's discovery of a huge shale gas deposit at the Vaca Muerta, or Dead Cow, shale field in Argentina's Patagonia region.
Shares in Repsol traded Wednesday at 19.38 euros ($27), up less than 1% on their Tuesday close. Repsol has a market capitalization of 25.8 billion euros.