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Cairn India to merge with Vedanta in $2.3-billion deal

Staff writer |
Mining and energy group Vedanta Ltd made a $2.3 billion (Rs 14,720 crore) offer on Sunday to buy out minority shareholders in cash-rich oil unit Cairn India, a deal that helps parent Vedanta Resources Plc repay hefty debts.

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Shareholders in Cairn India, the country's top private sector oil producer, will get one share in Vedanta Ltd for every share held, the companies said in a joint statement on Sunday.

The shareholders will also get one redeemable preference share in Vedanta Ltd with a face value of Rs 10, making the deal worth roughly $2.3 billion. That implies a premium of 7.3 per cent to Cairn's Friday close and a ratio of 1.04 for 1, marginally better than expectations of a simple 1 for 1 swap.

Cairn India has a roughly $2.6 billion (Rs 16,640 crore) cash pile.

The deal, expected to close in the first quarter of 2016, is the first major structural change under Vedanta Ltd chief executive Tom Albanese, the former Rio Tinto boss appointed last year. He said the deal moved Vedanta closer to its goal of being a major diversified player.

Though long-expected, the timing of the Cairn buyout is likely to have been triggered by a sharp drop in Cairn India's stock as oil prices fell, making for a favourable merger ratio for Vedanta. Cairn India shares have dropped over 50 per cent over the past year.

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