Cepsa Plunges as Santander Offers $3.9 Billion Stake

By Todd White and Charles Penty

Feb. 25 (Bloomberg) -- Compania Espanola de Petroleos SA, Spain’s second-largest oil company, fell as much as 41 percent in Madrid trading after Banco Santander SA said it may sell its holding for as much as 3 billion euros ($3.9 billion).

Santander, Spain’s biggest bank, is in talks to sell its 31.6 percent stake in Cepsa for between 30 and 35 euros a share, it said today in a statement. The midpoint of the range is less than half of Cepsa’s closing price of 66.75 euros on Feb. 23.

While Santander didn’t identify possible buyers, Expansion reported yesterday that Abu Dhabi-based International Petroleum Investment Co. is in talks to raise its 9.5 percent stake in Cepsa. Santander, Cepsa’s second-biggest shareholder after 49 percent owner Total SA, may need additional capital as its markets in Spain, the U.K. and Brazil suffer from a deepening recession, according to analysts at Nomura Securities.

“The strategy is to shore up capital,” said Daragh Quinn, an analyst at Nomura Securities in Madrid. “The U.K. economy looks bad and Brazil is slowing fast, so it all adds up.”

The Santander, Spain-based lender raised 7.2 billion euros in a rights offering in November to boost reserves. Its core capital, a measure of solvency, reached 7.23 percent in December, up from 6.31 percent in September, it said Feb. 5.

Cepsa, scheduled to post fourth-quarter earnings tomorrow, is about 94 percent owned by its four largest shareholders, Paris-based Total, Santander, IPIC and Madrid-based Union Fenosa SA, according to data compiled by Bloomberg.

Sell Order

Fenosa, with a 5 percent stake in Cepsa, asked Santander to sell it months ago, a spokesman said yesterday IPIC is also in talks to buy out Fenosa’s stake stake in Cepsa, Spanish newspaper Expansion reported yesterday.

Officials at Santander, Fenosa and IPIC declined to comment on the Expansion report. Khadem Al Qubaisi, IPIC managing director, said last month the company was considering raising its 9.5 percent stake in Cepsa.

IPIC, owned by the Abu Dhabi government, agreed Feb. 23 to buy Nova Chemicals Corp., Canada’s largest chemical maker, for $499 million. IPIC has invested more than $2 billion in the past 18 months, including stakes in EDP-Energias de Portugal SA, Portugal’s biggest electricity company, and MAN AG’s Ferrostaal, a German oil-services company.

“This is the time for them to pick up some of the companies they think are good values,” said Hanzada Nessim, a Dubai-based analyst at EFG-Hermes Holding SAE. “Abu Dhabi does have the money. You’ll see them doing more investment.”

Exploration, Production

Cepsa, run by Chief Executive Officer Dominique de Riberolles, said Oct. 30 that nine-month profit was almost unchanged at 563 million euros as higher income from exploration and production offset a drop in refining and distribution.

Cepsa’s largest refinery is at Gibraltar-San Roque, with an oil-processing capacity of 223,000 barrels a day. Its Huelva plant can handle 98,000 barrels a day, according to data compiled by Bloomberg.

Cepsa shares plunged as much as 21.10 euros and traded down 28 percent at 37.71 euros, the lowest since February 2005, as of 2:15 p.m. in Madrid after a suspension was lifted. Today’s decline extended yesterday’s drop of 22 percent, valuing the company at 10 billion euros.

Santander rose 3.4 percent to 4.86 euros in Madrid, valuing the bank at 39.7 billion euros. The shares are down 28 percent this year, in line with the 26 percent drop for the Bloomberg Europe Banks and Financial Services Index.

To contact the reporters responsible for this story: Todd White at twhite2@bloomberg.net Charles Penty in Madrid at cpenty@bloomberg.net