Mumbai : In a move to cut huge debts, India’s largest private miner Vedanta Ltd headed by billionaire Anil…

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Mumbai : In a move to cut huge debts, India’s largest private miner Vedanta Ltd headed by billionaire Anil Agarwal will absorb cash-rich oil firm Cairn India in a USD 2.3 billion all-share deal to create India’s largest diversified natural resources company. Shareholders in Cairn India, the country’s top private oil producer, will get one Vedanta equity share and one redeemable preference share for each share held in the company. The 10-rupee preference share of Vedanta, redeemable in 18 months, will carry a dividend of 7.5% per year and be listed on the National Stock Exchange. According to the companies the deal values Cairn India at a premium of 7.3% to its Friday closing price of 179.35


rupees, and implies that Cairn India shareholders get 1.04 Vedanta share for every share. Vedanta and its associates, who hold 59.88% in Cairn India, will not get any shares in the deal, which will see London-listed Vedanta Resources stake in Vedanta fall to 50.1% from the current 62.9%, the companies said in a joint release. Vedanta will use Rs 16,867 crore cash lying with Cairn to pay off part of its Rs 77,752 crore debt. The deal is expected to be completed in the last quarter of the current financial year 2015-16 (Jan-Mar). “The merger of Cairn India and Vedanta Ltd consolidates our position as India’s leading diversified natural resources champion, uniquely positioned to support India’s economic growth,” Vedanta chairman Anil Agarwal said. The merger is seen as an effort by the group to use the oil and gas producer’s cash to cut the metal and mining company’s massive debt without any major equity dilution and improve cash flow. “Vedanta Ltd would further consider consolidation of some of its wholly owned foreign subsidiaries,” the statement said.

Vedanta, previously known as Sesa Sterlite Ltd, in 2013 consolidated its iron ore mining business by merging Sesa Goa Ltd with Sterlite Industries (India) Ltd, which ran copper and aluminium businesses. “It will result in improved financial flexibility to allocate capital to the highest return projects and sustain strong dividends,” Vedanta Ltd chief executive Tom Albanese told PTI in an interview. The merger will help Cairn spread its risk from volatile oil business to other metals and commodities. “I am of the belief that diversified producers have enjoyed better shareholder returns than pure plays. If you look at how global oil and gas business has really suffered because of oil prices (fall in 2014), it clearly demonstrates that diversified groups are better than pure plays.

The merger derisks the business and stabilizes revenue stream,” he added. The long-anticipated move would take Agarwal a step closer to achieving his ambition of building an India-integrated resources group in the mould of Rio Tinto or BHP Billiton. The merger will create a diversified portfolio that will de-risk earnings volatility and drive stable cash flows through various commodity cycles, the companies said. The transaction is expected to be tax-neutral for Vedanta, Cairn India and their shareholders. Cairn India minority shareholders will get a 20.2% in the merged entity, while Vedanta’s minority shareholders will own a 29.7% stake. The deal will require regulatory approvals and the approval of a majority of the minority shareholders of Cairn India. ‘Natural resources champion’ l Cairn India shareholders will get 1 share of Vedanta for every share they hold; will also get a preferential share. l Vedanta expects deal to close by March 31, 2016 l Post merger, there will be only one Board; all interests of Cairn India, including Rajasthan oil block, to be transferred to Vedanta.

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