MADRID, Spain -- Mexican state oil company Pemex on Wednesday sold most of its holding in Spanish oil giant Repsol (IW 1000/49), ending a quarter-century partnership that had become increasingly tense in recent years.
Repsol analysts welcomed the sale, saying it should help ease boardroom tensions at the company, while the Spanish government said the move would not hurt ties between Spain and Mexico.
The stake sale comes just five days before Mexican President Enrique Pena Nieto is due to make his first official visit to Spain.
Pemex sold 7.9% of Repsol to unspecified private investors for 2.092 billion euros ($2.85 billion) in a placement handled by investment banks Citigroup Global Markets and Deutsche Bank.
The sale, which represents most of Pemex's 9.3% holding in Repsol, follows a period of growing disagreements on issues ranging from management appointments to the handling of investments in Argentina.
It comes as Pemex is raising cash as Mexican lawmakers prepare regulations to open the country's oil industry to foreign investment for the first time since 1938.
Management Discord, Low ROI
Pemex cited disagreements over the management of the company and low returns on its investment as reasons for the move.
"The divestment of the shareholding position in Repsol will allow for a better allocation of financial resources in projects and investments with higher expected returns and which will generate more value for Mexico," it said in a statement.
A source close to the deal said Pemex "wanted to have a level of power in Repsol that did not correspond to its 10% stake" but did not want to launch a takeover bid.
Pemex buys Repsol shares in 2011 in ~ US$27.48 and sells them yesterday for ~ US$26.55. Good investment? pic.twitter.com/ha93qV8J8y— Miguel Ángel Carreón (@CarreonMiguel) June 4, 2014
The Mexican group has been a Repsol shareholder ever since the Spanish group's initial stock market flotation in 1989.
But the relationship has been under pressure since 2011 after Pemex backed a failed bid by Spanish construction group Sacyr to take control of Repsol.
Pemex chief executive Emilio Lozoya also strongly criticised Repsol's handling of a conflict with Argentina, which in 2012 seized and nationalised YPF, a company 51% owned by Repsol.
And recently Repsol appointed a chief executive not supported by Pemex.
"If one can't have the participation one wishes within the management board, the best thing to do is to leave the company," Spain's secretary of state for Latin America, Jesus Manuel Gracia Aldaz, said in an interview with public radio RNE. "I can assure you that this will not pose any problem to bilateral ties. There is an excellent relationship with Mexico, of trust and mutual support and we will see this during the visit by Pena Neto."
Source of Instability
Repsol announced on May 23 that it had pulled out of Argentina, pocketing $6.3 billion in compensation and asset sales after Buenos Aires's takeover of YPF.
The news marked the final chapter of a bitter row sparked in April 2012 when Argentina's President Cristina Kirchner ordered the nationalization.
Repsol said it had earned $5 billion from the sale of Argentine government bonds that had been paid by Buenos Aires in compensation.
The seizure of the YPF operations forced Repsol to make provisions of 1.28 billion euros in 2013 and sent its profits for that year plunging by 90%.
"I think nobody expected that it would be this easy for Repsol to get compensation from Argentina," said Daniel Pingarron, an analyst at brokerage IG in Madrid.
The Repsol board has been "very divided," and Pemex's departure "could be positive in the medium term," he added.
Shares in Repsol, which were suspended from trading ahead of the announcement of the stake sale, closed down 3.6% at 20.11 euros, just above the price of the placement of 20.10 euros per share.
The stock was the biggest loser in the Ibex-35 index of most traded shares, which closed down 0.2% overall.
"In the medium term we feel that Pemex's exit is favorable since it was a source of instability in Repsol's ownership [that] has been eliminated," equity analyst Sonia Ruiz de Garibay of Beka Finance wrote in a research note.
Copyright Agence France-Presse, 2014