Decision on Arbitration
Banco Santander Central Hispano SA
04 April 2006
MATERIAL FACT
Banco Santander Central Hispano, S.A. (the 'Bank) announces that the decision on
the arbitral proceedings being carried out in the Netherlands Arbitration
Institute at the request of Total in connection with the tender offer launched
by the Bank on shares of Cepsa on September 25, 2003, has been notified to the
parties today.
The outcome of the decision can be summarised as follows:
- The Arbitrator accepts the interpretation of the Third Transitional
Provision of Act 26/2003 of July 17 which was being maintained by the Bank.
Accordingly, the Arbitrator considers that the agreements among Total and the
Bank to act in concert with respect to their investment in Cepsa became
ineffective by operation of the above mentioned Third Transitional Provision.
More specifically, the launching of the bid for Cepsa in September 2003, by
means of which the Bank acquired a 12.13 % of the share capital of Cepsa did not
constitute a breach of Clause 6 of the Agreement entered into by Total and the
Bank in 1995.
- Notwithstanding the foregoing, the fact that the Bank launched the
tender offer without prior consultation with Total gave rise, in the opinion of
the Arbitrator, to an irreconcilable difference between the parties that,
pursuant to the part of the agreements which had not become ineffective, implies
that Total has the right to repurchase from the Bank a 4.35 % of Cepsa at the
price stipulated in the agreements.
- The Bank and Total must proceed to the winding up of Somaen Dos, S.L.
(a holding company in which the Bank, Total and Union Fenosa, S.A. have
participations of approximately 60%, 25% and 15%, respectively). In this winding
up, the Bank will receive from Somaen Dos, S.L. a 19.92 % of the share capital
of Cepsa and Total will receive an 8.31 % of the share capital of Cepsa.
- Thus, the Bank consolidates its 27.7 % shareholding in Cepsa,
approximately, after deduction of the 4.35 % which is subject to the repurchase
rights of Total, in the case that such repurchase rights are exercised. Taking
into account the book value of the Bank's stake in Cepsa, a market price of euro
45 per share of Cepsa, and the price stipulated for the exercise by Total of its
repurchase rights over 4.35 % of the share capital of such company, the
estimated unrealised capital gain of the Bank in Cepsa is of euro 1.3 billion
approximately.
- The Arbitrator rejects the claims by Total that the Bank should: (i)
bear the tax costs resulting from the separation of the holdings in Cepsa; (ii)
return to the market the 12.13 % of the share capital of Cepsa acquired by means
of the tender offer in September 2003; and (iii) pay euro 500 million to
compensate moral damages.
- Some matters will be addressed in a separate complementary decision:
potential damages derived specifically from the non adherence to good faith
principles, and the costs and expenses of the arbitration proceedings.
- While the decision is executed, the cautionary measures previously
adopted by the Arbitrator affecting the participation in Cepsa through Somaen
Dos, S.L. remain in place, but not in connection with the 12.13 % shareholding
acquired by means of the tender offer.
Boadilla del Monte (Madrid), April 3 ,2006
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