LUKoil Close to Deal With Repsol

LUKoil is close to a deal with shareholders of Repsol, including Spanish builder Sacyr Vallehermoso, to buy a 30 percent stake in the oil company but still needs to find financing for the deal, a source close to the talks said Friday.

LUKoil could pay Sacyr 28 euros a share for its 20 percent stake in Repsol -- double Friday's closing price of 13.91 euros -- the source said.

"Much of the deal has been secured. The price LUKoil would pay is agreed on at 28 euros per share," the source said.

The Russian firm would buy another 10 percent stake in Repsol from Spanish savings bank La Caixa, insurance company Mutua Madrilena, and Repinves, which is partly owned by La Caixa, the source said.

But LUKoil still has to find financing for the deal, the source said.

"How LUKoil would finance the deal has not been arranged, and I don't think it will be over the next few hours," they said.

At 28 euros per share, 30 percent of Repsol is worth 10.7 billion euros ($13.40 billion).

Sacyr paid 26.7 euros per share for its stake in 2006.

Another hurdle that must be overcome, the source said, is that the purchase must not interfere with a planned merger between Spanish utilities Gas Natural, in which Repsol has a 30 percent stake, and Union Fenosa.

"The issue of how a potential LUKoil stake in Repsol could affect Gas Natural's bid for Fenosa is an important one," the source said.

Gas Natural plans to partly fund its 16.7 billion euro bid for Fenosa with a share issue, to which Repsol has pledged to subscribe 1.6 billion euros.

LUKoil declined to comment on reports of a deal, while Sacyr Vallehermoso referred to previous statements in which the company has said no deal has been reached over its planned asset sales.

La Caixa said Friday that it was talking to LUKoil about its Repsol stake.

The savings bank, whose holding company, Criteria, holds a 14 percent stake in Repsol, said any sale hinged on Sacyr agreeing to sell its 20 percent stake to LUKoil.

A takeover of Repsol would go a long way toward advancing LUKoil's long-held desire to establish a material refining presence in Western Europe.

Although both Spain and Repsol have said they want Repsol to remain Spanish and independent, Spanish Prime Minister Jose Luis Rodriguez Zapatero said Thursday that he would respect the independence and public-listed status of both LUKoil and Repsol.

Analysts on Friday cast doubt on how LUKoil would raise the financing for a deal.

"In our view, LUKoil cannot afford to pay anywhere close to $10 billion on its own," said analyst Igor Kurinnyy. He expects LUKoil to turn free cash flow negative in the fourth quarter.