Mubadala to sell stake in Cepsa to Carlyle Group

Update: Transaction expected to close by end of this year, Mubadala says

Mubadala agreed to sell a minority stake in Spanish oil and gas firm Cepsa to US-based Carlyle Group. Reuters

Mubadala Investment Company, the Abu Dhabi strategic investment firm, agreed to sell a significant minority interest in its fully owned Spanish oil and gas firm Compania Espanola de Petroleos (Cepsa) to US-based Carlyle Group.

Mubadala will remain the majority shareholder of Cepsa under the deal, while Carlyle Group will acquire between 30 and 40 per cent, the UAE company said on Monday.

The deal puts the entire enterprise value of Cepsa at $12 billion (Dh44bn), according to Mubadala, which did not disclose the exact size of the transaction.

"We are extremely satisfied with the completion of the process and achieved a very fair valuation [for our stake]," Musabbeh Al Kaabi, chief executive of petroleum and petrochemicals at Mubadala, told The National.

“Carlyle is an established, respected and experienced investor with significant assets under management in the global energy sector,” he added. “We look forward to working in partnership with [them and Cepsa] to further grow the business.”

Equity for the investment will come from some of the US private equity firm’s funds - Carlyle International Energy Partners I & II, Carlyle Partners VII, Carlyle Europe Partners V - as well as co-investors.

“Cepsa … offers strong potential and future opportunities in the global energy sector,” added Marcel Van Poecke, head of Carlyle International Energy Partners.

Cepsa is Europe’s biggest privately-owned oil and gas company, with an extensive network of retail service stations across the Iberian Peninsula and two refineries in Spain. It is also a global leader in the production of linear alkyl benzene (LAB), a key component in the manufacture of biodegradable detergents, and is the second-largest producer of phenol and acetone.

The 90-year-old company has worked in partnership with Abu Dhabi for many years. It was originally an investment of Ipic, which became part of Mubadala – the government’s state investment vehicle – in a merger in 2017.  Mubadala has built its stake in Cepsa since and bought shares in it held by France’s Total in 2011.

Tuesday’s transaction is subject to regulatory approvals and expected to close by the end of 2019. It marks the conclusion of a dual process, led by Mubadala, to explore options for a public offering or private placement, to bring in new partners as part of its portfolio management strategy.

Last November, Mubadala announced its intention to float 25 per cent of Cepsa’s capital on the Spanish stock exchange, in what could have been the biggest oil company initial public offering in the past decade. The IPO was slated to take place in the fourth quarter of 2018, subject to market conditions.

Mr Al Kaabi told The National that global capital markets were "extremely poor" throughout last year and into 2019, and Mubadala had decided an IPO was not the best way to maximise value from the planned sale. "The business is performing very well and we were under no pressure to sell," he said.

The deal also demonstrates Mubadala’s and Carlyle’s “shared vision and goals for Cepsa. The priority now is to work with our new partner on value creation across the multibillion-dollar initiatives in Cepsa’s pipeline,” the chief executive added.

In particular, Cepsa has plans to spend $500 million over the next three years to develop its LAB business, of which $300m will be spent in Abu Dhabi. It has a joint venture agreement with state-owned Abu Dhabi National Oil Company to build a 150,000-tonne LAB plant in the emirate, with a project value of between $575m and $625m, Cepsa's chief executive Pedro Miro told The National last year.

The front-end engineering and design contract was awarded at the end of last year and is expected to complete by the third quarter of 2019, Mr Al Kaabi said on Monday – after which time Cepsa and Adnoc will be in a position to finalise terms and conditions for the rest of the JV.

“I see strong momentum from both parties to accelerate the process,” Mr Al Kaabi said.

Outside the UAE, Cepsa is pressing ahead with its upstream plans in Algeria, and a significant downstream expansion strategy in Spain, among other projects, he added.