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    600688   CNE000000BB2

SINOPEC SHANGHAI PETROCHEMICAL COMPANY LIMITED

(600688)
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Repsol to buy Talisman Energy for hefty premium

12/16/2014 | 05:38pm EDT
Repsol chairman Antonio Brufau answers a question during a news conference at Repsol's headquarters in Madrid

MADRID (Reuters) - Spain's Repsol (>> Repsol SA) has agreed to buy Talisman Energy (>> Talisman Energy Inc.), Canada's fifth-largest independent oil producer, for $8.3 billion as the drop in oil prices pushes energy companies to take the plunge on big M&A deals.

MADRID (Reuters) - Spain's Repsol (>> Repsol SA) has agreed to buy Talisman Energy (>> Talisman Energy Inc.), Canada's fifth-largest independent oil producer, for $8.3 billion as the drop in oil prices pushes energy companies to take the plunge on big M&A deals.

Repsol will also take on $4.7 billion of Talisman's debt.

A near halving in the oil price since June has lowered price tags on producers such as Talisman, spurring renewed interest from Repsol, which had long been searching for oil and gas assets in North America and elsewhere. [O/R]

But analysts said the Spanish company had paid a hefty price for the embattled Canadian company and in the long term it could have to consider a sale of its 30 percent stake in Gas Natural (>> Gas Natural SDG SA), a move Repsol said was not in the works.

"We don't need to sell our stake in GasNat (Gas Natural) to do this deal. For us GasNat brings stability, dividends, optionality," Repsol Chairman Antonio Brufau told analysts.

The proposed acquisition will boost Repsol's exploration and production arm and fill a gap left by the seizure of its Argentine business, YPF, in 2012. It will also help to cut a reliance on high-risk oil-producing areas such as Libya and Venezuela.

Chief Executive Josu Jon Imaz said: "It's the right moment because now our valuation of Talisman assets is higher than the price we are paying." He said Talisman had what Repsol was looking for: growth in upstream business, geographical diversification and shale assets.

Repsol shares fell 0.4 percent to 5.64 euros. Shares in Talisman closed up 48 percent at C$8.84 in Toronto.

Weighed down by problem-plagued and unprofitable North Sea operations, Talisman shares had dropped nearly two-thirds in the year before the Repsol offer as its struggled to cope with falling prices.

"Our progress has been limited by our capital obligations in the North Sea and elsewhere, which ... affected our ability to fund growth opportunities," Hal Kvisle, Talisman's chief executive, said.

Kvisle said Talisman's ability to continue as an independent company had been quite a bit better when oil was between $90 and $100 and it was difficult to negotiate with a potential buyer like Repsol in a falling commodity price environment.

"It takes a long-term view at a time like this, it's not easy," he added.

Along with the North Sea assets, most of which are in a joint venture with China's Sinopec (>> Sinopec Shanghai Petrochemical Co Ltd), Talisman brings profitable North American shale assets and oil properties in South America, Southeast Asia and elsewhere.

Kvisle said a 300,000 acre (121,410 hectare) position in the hotly-tipped Duvernay shale play in west-central Alberta was one of the first assets Talisman started discussing with Repsol.

Barclays analysts said in a note: "For this price Repsol gets a business that is free cash flow negative with a problematic North Sea business of questionable value, but also what it considers attractive assets in Canada, Latin America and Southeast Asia."

Under the proposed deal, the $8.3 billion in cash Repsol will pay for Talisman shares represents a 56 percent premium to the Calgary-based company's market value of $5.33 billion on Monday.

The Spanish company said the acquisition would boost its oil production by 76 percent to 680,000 barrels per day, while its reserves would increase 55 percent.

Talisman's board has approved the deal unanimously.

Repsol plans to issue about 5 billion euros in hybrid debt to secure its investment grade credit rating after the deal, due to close by mid-2015.

Repsol was advised by JP Morgan (>> JPMorgan Chase & Co.). Talisman was advised by Nomura and Goldman Sachs (>> Goldman Sachs Group Inc).

(1 euro=$1.2443)

($1=$1.16 Canadian)

(Additional reporting by Scott Haggett and Nia Williams in Calgary; Editing by Jane Merriman, Peter Galloway and Tom Brown)

By Julien Toyer and Jose Elías Rodríguez


ę Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
EURO / ARGENTINE PESO (EUR/ARS) 0.17% 114.9075 Delayed Quote.11.61%
NATURGY ENERGY GROUP, S.A. 0.34% 21.62 Delayed Quote.14.93%
REPSOL S.A. 0.41% 9.259 Delayed Quote.11.77%
SEA LIMITED 1.86% 281.29 Delayed Quote.38.74%
SINOPEC SHANGHAI PETROCHEMICAL COMPANY LIMITED 0.93% 3.25 End-of-day quote.-5.52%
THE GOLDMAN SACHS GROUP, INC. 0.88% 378.19 Delayed Quote.42.16%
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Financials
Sales 2021 89 042 M 13 783 M 13 783 M
Net income 2021 3 494 M 541 M 541 M
Net cash 2021 4 284 M 663 M 663 M
P/E ratio 2021 6,06x
Yield 2021 8,42%
Capitalization 34 487 M 4 437 M 5 338 M
EV / Sales 2021 0,34x
EV / Sales 2022 0,28x
Nbr of Employees 8 466
Free-Float 46,3%
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Number of Analysts 9
Last Close Price 1,67 CNY
Average target price 2,00 CNY
Spread / Average Target 20,0%
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Managers and Directors
Ze Min Guan General Manager & Director
Guan Zemin President
Jun Du CFO, Executive Director & Deputy General Manager
Hai Jun Wu Chairman
Yan Hui Ma Chairman-Supervisory Board