YPF Hires Citigroup in What May Be Year’s Biggest Argentina M&A Deal

  • Metrogas part of YPF’s $1 billion non-core asset sale process
  • Divestment could be Argentina’s biggest M&A deal in 2017

YPF SA, Argentina’s biggest oil company, has hired Citigroup Inc. to help sell its controlling stake in Metrogas SA, the country’s largest gas distributor, according to two people with knowledge of the plan.

Citigroup was selected among more than ten investment banks to advise on what may be the biggest M&A deal in Argentina this year, according to one of the people. The mandate was signed this week and the process will start shortly, a second person said. The people asked not to be named as the talks are private.

Representatives from Buenos Aires-based YPF and New York-based Citigroup declined to comment.

Earlier this year, YPF turned over control of Metrogas and other subsidiaries to Chief Financial Officer Daniel Gonzalez Casartelli, a former M&A banker, in the first step toward divestment of non-core assets that could bring in at least $1 billion. YPF, which owns 70 percent of Metrogas, could get around $700 million for its stake, according to an estimate from TPCG Capital SA, while research firm AR Partners has said the price may be as high as $1 billion.

YPF could also get about $210 million if it chooses just to sell 21 percent of Metrogas to avoid having a controlling stake in the company, Florencia Mayorga Torres and Facundo Melendez, analysts at Buenos Aires-based brokerage TPCG Capital, said in an email on Friday

YPF is seeking to cut $8.3 billion of debt and fulfill a regulatory requirement to divest its gas distribution unit. Metrogas must be controlled by a non-gas producer in order to comply with Argentine rules that prohibit companies from both producing and distributing gas. YPF had received exemption under the previous government.

The divestment plan was initiated last year by Chief Executive Officer Ricardo Darre after the company posted a record second-quarter loss. Profertil, the nation’s biggest fertilizer producer, may also be sold. Metrogas’s shares, owned by funds such as Moneda Asset Management SA, have almost doubled in 2017.

— With assistance by Carolina Millan

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