Cairn India to merge with Vedanta; share swap at 1:1
Shareholders will also get one redeemable preference share
MUMBAI, JUNE 14:
The boards of directors of Vedanta Limited and Cairn India Limited, both subsidiaries of UK-listed Vedanta Resources PLC, today announced a merger between the diversified mining and metals company Vedanta Limited and oil and gas explorer Cairn India.
The merger is in essence a reverse takeover by Vedanta Ltd, since Cairn India is twice the size of Vedanta. The move is intended to help ease Vedanta's crippling debt of Rs. 37,636 crore using cash reserves of over Rs. 16,800 crore of debt-free Cairn India. While the promoter holding in Cairn India is nearly 60 per cent, the merger will still have to be approved by the majority of minority shareholders in Cairn.
This includes a considerable holding by Cairn Plc, the erstwhile Scotland-based parent of Cairn India. The merger will also need to be approved by income-tax authorities, who have a tax notice of nearly Rs.30,000 crore jointly against Cairn PLC and Cairn India.
As part of the merger, minority shareholders of Cairn India will receive for each equity share held: 1 equity share in Vedanta and 1 redeemable preference share in Vedanta Limited with a face value of Rs. 10 with an assured dividend of 7.5 per cent to every year. It will have an tenure 18 months, after which it will be redeemed for cash at face value.
No shares will be issued to Vedanta Limited or any of its subsidiaries for their shareholding in Cairn India.
Vedanta Limited will arrange for a third party facility enabling a cash exit for RPS holders at par within 30 days from issuance.
Approximately 752 million each of equity shares and RPS will be issued to the minority shareholders of Cairn India by Vedanta Limited pursuant to the merger.
The shares of both companies are trading at roughly the same level. On Friday, on the NSE, Cairn India closed at Rs. 180.75 while Vedanta finished at Rs. 183.80.
Vedanta Limited will continue to be listed on the BSE Limited and National Stock Exchange.
The companies say that business strategy will remain unchanged, with continued focus on delivering attractive growth, sustainable development and long-term value for all shareholders. The merger is expected to be complete by first quarter of CY 2016.
Anil Agarwal, Chairmban of Vedanta plc, said: “The merger of Cairn India and Vedanta Limited consolidates our position as India’s leading diversified natural resources champion, uniquely positioned to support India’s economic growth. The independent Directors, at both Vedanta Limited and Cairn India, unanimously recommend the proposed combination. This marks a significant step towards achieving our stated long term vision of a simplified group structure with alignment of interests between all shareholders for the creation of long term sustainable value.”
Tom Albanese, CEO of Vedanta Limited, said: “This transaction consolidates our portfolio of Tier-I assets which, combined with strong management, will deliver superior returns for all shareholders. It will result in improved financial flexibility to allocate capital to the highest return projects and sustain strong dividends. The combined entity is uniquely positioned to help unlock India’s wealth of world-class energy and mineral resources.”
Mayank Ashar, CEO of Cairn India, said: “The merger with Vedanta Limited will generate additional value for our shareholders and derisks Cairn India by providing access to a portfolio of diversified Tier-I, low cost, long-life assets, to deliver significant near term growth. Our Rajasthan fields continue to remain our core asset. The financial strength of the enlarged group will ensure greater access to capital to further Indian oil & gas development."
Following completion of the transaction: Vedanta plc ownership in Vedanta Limited is expected to decrease to 50.1 per cent from its current 62.9 per cent shareholding.
Cairn India minority shareholders will own 20.2 per cent and Vedanta Limited minority shareholders will own a 29.7 per cent stake in the enlarged entity.
Vedanta Limited would further consider consolidation of some of its wholly owned foreign subsidiaries.