London-listed mining group Vedanta Resources will acquire a majority of up to 60 per cent stake in Cairn India for $ 9.6 billion to gain access to the nation's largest onshore oilfield. Vedanta will pay $ 8.48 billion to buy Edinburgh-based Cairn Energy Plc's 51 per cent stake in the company, the two firms said in separate conference calls.
The price of Rs 405 per share is a 32 per cent premium to Cairn India's average closing price over 90 days. This includes a Rs 50 per share non-compete premium for Cairn Energy Plc not entering into oil and gas business in India, Pakistan, Bhutan and Sri Lanka.
The $ 9.6 billion deal value takes into account the open offer Vedanta would make to Cairn India stockholders for 20 per cent of issued shares at Rs 355 a piece (minus the non-compete fee), Vedanta Resources Chairman Anil Agarwal, 57, said.
The acquisition “significantly enhances Vedanta's position as a natural-resources champion in India,” he said.
“We were a small base metal producer, with ambitions of becoming an international player in all the natural resources. The acquisition can also position Vedanta as an Indian oil major,” Agarwal said, adding that the deal would not impact the company's growth plans in its core-business.
Vedanta will buy at least 40 per cent and up to 51 per cent of Cairn India from London-listed Cairn Energy. The final number of shares sold by Cairn Energy will depend on the results of the open offer, which could take Vedanta's stake to 60 per cent.
The process will take about three months to complete, Cairn Energy Finance Director Jann Brown said.
Cairn Energy Chief Executive Bill Gammell said the company will return most of the cash raised to shareholders and invest the rest in exploration.
“It's the right time to realize some of the value we have created,” he said. “This isn't an exit from India for Cairn Energy Plc.”
Cairn Energy is expected to have a residual interest of between 10.6 per cent and 21.6 per cent in Cairn India.
London-listed Vedanta Resources will acquire 31 to 40 per cent interest in Cairn India while the remaining 20 per cent would be taken by group firm Sesa Goa.
Agarwal said his mining company will raise $ 6.5 billion in debt to fund the acquisition while Sesa Goa, India's biggest iron ore exporter, will fund the deal mainly with its cash resources.
Standard Chartered Plc, Credit Suisse Group AG and Goldman Sachs Group Inc are arranging the financing.
“The transaction will also ensure we have the financial flexibility to focus on an active multi year exploration and drilling programme in Greenland (Cairn Energy's the only other asset part from those held by Cairn India) and also consider further material growth opportunities,” Gammell said.
Source: Hindustan Times