Mumbai: In its biggest consolidation, billionaire Anil Agarwal's group announced merger of its cash-rich oil company Cairn India with parent Vedanta to cut debt at the struggling resources arm. Cairn India shareholders will receive one share of Vedanta Ltd for every share they held. Also, they will get one redeemable preference share in Vedanta Ltd with a face value of Rs 10.
"This is an implied premium of 7.3 per cent to the Fridayclosing price of Cairn India," said Vedanta Ltd CEO, Tom Albanese .The long-anticipated move would take Agarwal a step closer achieving his ambition of building an India-integrated resources group in the mould of Rio Tinto or BHP Billiton. But the move needs approval of 50 per cent of minority shareholders of Cairn India, including its former parent Cairn Energy, which owns 9.8 per cent of total shares, and state-run insurance company LIC, which owns another 9 per cent.
"This is a good deal for Cairn shareholders," Albanese said. The transaction is targeted to be closed by March 31, 2016 and would need approval of both the stock exchanges - BSE and NSE market regulator SEBI, High Court as well as Ministry of Petroleum and Natural Gas for transfer of Cairn India's interest in oil and gas blocks like Barmer basin oil block in Rajasthan and Ravva oil and gas field in KG Basin to Vedanta Ltd. Albanese said the Cairn brand will be retained even after the merger and there will be no job cuts. "Cairn is a very strong brand locally and we intend to retain that."
Through the merger, Agarwal plans to use Rs 16,867 crore cash lying with Cairn to pay off part of Vedanta's debt. Cairn has no debt, and cash needs have dwindled after investment programme was slashed by 60 per cent to USD 500 million for current year.
Vedanta Ltd, India's top producer of aluminum and copper, is nation's second-most indebted metals company and its annual interest costs is nearly three times that of the London parent. It has a debt of Rs 77,752 crore, excluding a USD 1.25 billion inter-company loan from Cairn India. Cairn India is almost 60 per cent owned by Vedanta.
