London-listed Anil Aggarwal-led mining group Vedanta Resources on Monday announced its decision to acquire a majority of up to 60 per cent stake in Cairn India for $9.6 billion.
The deal will give Vedanta Resources access to India's largest onshore oilfield. Vedanta will pay $8.48 billion to buy Edinburgh-based Cairn Energy's 51 per cent stake in the company, the two firms said in separate statements.
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 Rs.50 per share non-compete premium for Cairn Energy not entering into the 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 said. The acquisition would significantly enhance the 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 a major oil player in India.
The deal would not impact the company's growth plans in its core-business,'' Mr. Aggarwal added.
The whole process will take about three months to complete, Cairn Energy Finance Director Jann Brown said in a statement.
Cairn Energy Chief Executive Bill Gammell said the company would return most of the cash raised to shareholders and invest the balance in exploration.
“It is the right time to realise some of the value we have created. This is not an exit from India for Cairn Energy,'' he added.
Cairn Energy is expected to have a residual interest of between 10.6 and 21.6 per cent in Cairn India.
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.
Mr. Agarwal said his mining company would 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.
Vedanta will be the second largest firm after BHP Billiton to diversify from mining into oil and gas.
The zinc, copper and iron ore mining firm will get hold of Cairn India's Mangala oilfields in Rajasthan that are now producing 1.25 lakh barrels a day and have the potential to go up to 1.50 lakh bpd.
Vedanta's deal will be contingent on government approval, as Cairn's three producing oil and gas assets, including the giant Rajasthan fields and seven exploration blocks.
Mr. Gammell said he was hopeful of government support for the deal.
