UPDATE 7-Lukoil closes on deal on Repsol buy-source

Fri Nov 21, 2008 7:57pm GMT

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* La Caixa in talks with Lukoil on Repsol stake sale

* Lukoil buy of Repsol may depend on Sacyr, financing

* Lukoil reported close to deal with Sacyr at 28 euros/shr (Adds quotes from source saying deal close, issues pending)

By Carlos Ruano and Dmitry Zhdannikov

MADRID/MOSCOW, Nov 21 (Reuters) - Russia's Lukoil (LKOH.MM) is close to a deal with shareholders of Repsol (REP.MC), including Spanish builder Sacyr Vallehermoso SVO.MC, 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 on 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 -- said the source.

"Much of the deal has been secured. The price Lukoil would pay (for Repsol shares) is agreed on at 28 euros per share," the source said.

The Russian company 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, according to the source, is that the buy must not interfere with a planned merger between Spanish utilities Gas Natural (GAS.MC), in which Repsol has a 30 percent stake, and Union Fenosa UNF.MC.

"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 where the company has said no deal has been reached over its planned asset sales.

La Caixa said on 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.

Shares in Sacyr, Criteria and Repsol all soared higher on the news, becoming the top three gainers in the Spanish blue-chip index.

Sacyr closed up 15.35 percent at 8.49, while Repsol rose 2.28 percent to 13.91 and Criteria was up 8.15 percent at 2.52.

FINANCING IN QUESTION

Lukoil, 20 percent-owned by U.S. oil major ConocoPhillips (COP.N), was 5.84 percent lower at 777 roubles.

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 independent and Spanish, Spanish Prime Minister Jose Luis Rodriguez Zapatero said on Thursday 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 cashflow negative in the fourth quarter.

Lukoil also made a big purchase earlier this year, agreeing a 1.35 billion euro ($1.7 billion) deal in June to buy 49 percent of Italian refiner ERG's Isab di Priolo refinery in Sicily, which was finalised earlier this month.

La Caixa said it could be involved in the financing of any deal and would meet banks on Friday to discuss possible deals.

Sacyr Vallehermoso put its Repsol stake -- and other assets -- up for sale in September. It is struggling with a falling property market and massive debt. (Additional reporting by Tom Bergin in London, and Tracy Rucinski, Judith MacInnes and Robert Hetz in Madrid; Writing by Jason Webb and Jonathan Gleave; Editing by David Cowell and John Wallace)

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