The National Company Law Tribunal (NCLT) on Thursday approved the metals and mining firm Vedanta’s merger with its cash-rich oil subsidiary Cairn India, paving the way for the formation of the fourth-largest resource company in the world after BHP Billiton, RioTinto and Glencore Plc.
The initial deal terms, announced in June 2015, were revised in July 2016 in order to address the concerns of the minority shareholders in Cairn India.
According to the revised deal, minority shareholders in Cairn India will receive, for each equity share held, one equity share, and four redeemable preference shares with a face value of ₹10 in Vedanta Limited.
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The preference shares will carry a coupon of 7.5% and a tenure of 18 months.
“The National Company Law Tribunal, Mumbai Bench, has today approved the Scheme of Arrangement between Cairn India Limited and Vedanta Limited, and their respective shareholders and creditors,” according to a statement from Cairn India. “The certified copy of the order is awaited from the Tribunal,” it added.
Both companies declined comment.
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“It’s just a matter of days when the deal will be completed. It’s more [to do with] procedural issues,” a source in the know of the development told The Hindu . The effective date of merger will be April 2016 and synergies of the merger will be seen in FY2017-18, Anil Agarwal, chairman of Vedanta Resources had told The Hindu in an earlier interview.
Ownership pattern
Following the merger, Vedanta Plc.’s ownership in Vedanta Limited is expected to fall to 50.1% from its current 62.9%.
Cairn India minority shareholders will own 20.2% and Vedanta Limited minority shareholders will own a 29.7% stake in the enlarged entity.
Speaking about the deal in July 2016, Tom Albanese, CEO of Vedanta Limited, had said: “The strategic rationale for merging Vedanta Limited and Cairn India remains highly compelling. Diversified resources companies have delivered superior returns for shareholders historically. The transaction consolidates our portfolio of attractive Tier-I assets and simplifies the group structure, better positioning the group to deliver superior value to all shareholders over the longer term.”
Shares of Vedanta Limited rose 1.78% to ₹265.7, valuing the resources firm at ₹78,771 crore. Cairn India shares gained 2.68% at ₹298.9 in a firm Mumbai market on Thursday.