Cairn to sell 40% stake in Indian arm to Vedanta for $6.8bn

Edinburgh-based Cairn Energy today said it will sell a maximum of 40% stake in its Indian unit to mining group Vedanta Resources for USD 6.8 billion.

Cairn had in August last year announced sale of 40 to 51% stake in Cairn India to Vedanta. The announcement today follows the result of open offer Vedanta Group firm Sesa Goa made to minority shareholders.
  
"A total of approximately 155 million Cairn India shares, representing 8.1% of the share capital, have been tendered" in the open offer that closed on April 30, the company said in a press statement. Sesa Goa had previously bought 10.4% stake in Cairn India from Petronas International Corp of Malaysia.Together with the shares tendered in the open offer, Sesa Goa now has 18.5 per cent stake in Cairn India. "Cairn and Vedanta have agreed that, for the purposes of the formula set out in the Share Purchase Deed entered into in August 2010. These (Petronas) shares will all be treated as if they had been acquired in the open offer," Cairn said.
 
"Accordingly, on completion of the transaction, Cairn will sell a stake in Cairn India to Vedanta equivalent to 40% of the share capital, following which Cairn will hold a residual interest of 21.7% of the share capital," it added. Vedanta is paying Cairn Energy Rs 405 per share, including a Rs 50 per share non-compete fee to keep the Edinburgh-based firm out of India. Besides USD 6.8 billion it is paying to Cairn Energy, Vedanta group bought 8.1% shares from minority shareholders for USD 1.24 billion and 10.4% stake from Petronas for USD1.47 billion. Sesa Goa offered Rs 355 a share to the minority stockholders, after paying Malaysia's Petronas Rs 331 a share. Robust commodity demand has helped Vedanta resources' FY11 revenues jump 44% to USD 11.4 billion. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 55% to USD 3.6 billion. Meanwhile, during the analyst concall of the Vedanta results, Chairman Anil Agarwal sounded rather confident of the deal with Cairn Energy going through. While the original deal size was seen at USD 9.6 billion it has now come down to USD 9.4 billion as Vedanta's group company Sesa Goa acquired a 10.4% in Cairn India from Petronas at a lower price than that offered under the deal. Agarwal also said he believes the government will not link the proposed deal with the contentious royalty issue. Anil Agarwal said,