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Vedanta Completes Cairn India Deal, Buys 58.5% For $8.67B

08 December, 2011

London Stock Exchange-listed Vedanta Resources has completed the deal for purchasing majority stake in Cairn India in a transaction announced over 15 months ago. The deal has cost Anil Agarwal-led Vedanta Group around $8.67 billion, which also includes share purchases through open offers and block deals from UK-listed parent company Cairn Energy Plc.

The Vedanta group now holds 58.5 per cent stake in Cairn India, of which 20 per cent is held by Vedanta Resources subsidiary Sesa Goa Ltd.

“Cairn is pleased to announce that the transaction has now completed. Net proceeds to Cairn from the sale of 30 per cent shareholding in Cairn India were $4.1 billion in cash. In July 2011, Cairn completed the sale of 10 per cent shareholding in Cairn India to Vedanta for net proceeds of approximately $1.4 billion in cash,” Cairn Energy stated.

Cairn retains approximately 22 per cent shareholding in Cairn India, valued at nearly Rs 13,000 crore ($2.51 billion), according to the closing price of Cairn India on Thursday. Cairn Energy plans to distribute $3.5 billion to its shareholders from the sale proceeds.

The deal faced several regulatory hurdles though, related to royalty payments to the Indian government due to Cairn India’s partnership with the state-controlled ONGC in its key assets in India. Moreover, the environmental issues related to the mining operations of the Vedanta Group and its lack of business expertise in the oil & gas sector also came under fire.

The deal, one of the largest in India’s energy sector, was originally announced at a size of $9.6 billion. However, in June this year, the two parties agreed to remove the non-compete fee.

In April, Vedanta Resources Plc., through Sesa Goa, acquired 10.4 per cent stake for $1.48 billion from Petroliam Nasional Berhad. It also picked up additional 8.1 per cent for $1.24 billion via the open offer. In June, Vedanta acquired another 10 per cent while its unit Sesa Goa picked up another 1.5 per cent earlier this week.

“I am delighted to announce completion of this transaction which represents a major milestone in Cairn’s history. It crystallises the very significant value creation that we have delivered from our Indian business and allows us to return around three-and-a-half billion dollars to shareholders. Our remaining 22 per cent shareholding in Cairn India, retained cash and balance sheet strength provide financial flexibility and an excellent platform for future growth opportunities,” said Simon Thomson, chief executive of Cairn Energy.

“The acquisition is a landmark event for the global natural resources sector and for India, which is looking at sustainable energy sources to fuel its growing economy. We would like to express our deep sense of gratitude to the Government of India for its support and co-operation. Vedanta and Cairn India have a shared vision of sustainable development, with focus on delivery, excellence and costs, and we are delighted with this partnership. Cairn India possesses an enviable talent pool and we welcome them to the Vedanta family. We firmly believe that Cairn India has the potential to double its current capacity and we will work together to achieve it,” said Anil Agarwal, chairman of the Vedanta Group.

 


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Vedanta Completes Cairn India Deal, Buys 58.5% For $8.67B

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