Vedanta Ltd. sweetened the deal for Cairn India Ltd. shareholders by increasing the number of preference shares four times to salvage a deal which would help create a natural-resources group to compete with BHP Billiton Ltd. and Vale SA. If the fresh offer is accepted and the merger is through, Cairn India minority shareholders will own 20.2% in the merged entity and Vedanta’s minority shareholders 29.7%.
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“Pursuant to the revised and final terms, each Cairn India minority shareholder will receive, for each equity share held, 1 equity share in Vedanta, 4 Redeemable Preference shares with a face value of Rs 10 in Vedanta, with a coupon of 7.5 per cent and tenure of 18 months from issuance”. The new offer implies a premium of 20% on a month’s average of Cairn India’s share price, Vedanta said in a statement issued after the boards of both the companies approved the proposal.
MUMBAIOil explorer Cairn India Ltd, controlled by billionaire Anil Agarwal, said on Thursday consolidated net profit in the first quarter of its business year fell 28 percent from the same period a year ago due to lower crude oil prices. The proposed merger has been hanging fire since Vedanta announced the $2.3 billion all-share deal in June a year ago.
Cairn India ended 8.5 per cent higher at Rs 192.
Sudhir Mathur, CFO and acting CEO of Cairn India, said: “Cairn India shareholders will benefit from exposure to a diversified portfolio of world-class, low-cost, long-life assets with significant growth”. “The simplified corporate structure will better align interests between all shareholders for the creation of long- term sustainable value”, Agarwal said in the statement.
Cairn India, the petroleum exploration arm of London-listed Vedanta Resources, plans to continue investing in its existing projects to enhance domestic hydrocarbon production despite tough operating conditions and uncertain economic environment mainly because of strong demand outlook for the commodities.
The company also hopes to complete the process of the merger with parent company Vedanta Ltd by the end of March 2017.
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Vedanta shareholders will vote on the new offer on September 8, while Cairn India shareholders will vote on September 12. Cairn India had 233.9 billion rupees of cash and near cash as of June 30. The government has attached Cairn Energy’s remaining stocks in Cairn India till the pendency of the tax case, now under worldwide arbitration. Vedanta Ltd.is India’s most-indebted base metals company.
