Merger of cash rich oil explorer Cairn India with its debt-laden parent Vedanta Ltd will create a more capital efficient structure, Vedanta CEO Tom Albanese said today.
The sweetened merger deal, he said, has received "constructive feedback" from minority shareholders, who hold the key to the amalgamation.
The merger will create a stronger company. "It will basically (create a) more efficient capital structure, it will get re-rating and ultimately the re-rating will benefit shareholders of both the companies," he told PTI here.
In a bid to salvage the the deal, billionaire Anil Agarwal-led Vedanta Group last month sweetened the deal by offering three additional preference shares in hope of winning over minority shareholders like LIC and Cairn Energy plc of UK.
The USD 2.3 billion all-share transaction was originally announced on June 2015 and the deal to create India's largest diversified natural resources firm, which could compete with BHP Billiton Ltd and Vale SA, was to close in March this year.
But winning over half of the minority shareholders including LIC, which was said to be opposed to the deal, was providing to be difficult and so Venta offered one equity share and four redeemable-preference shares with a face value of Rs 10 each.
The preference shares will carry a coupon of 7.5 percent and tenure of 18 months.
"One could ask a question why did you increase ratio in favour of Cairn shareholder. I think it was pragmatic response by the boards recognising that there is importance to get support of both shareholders," he said.
The revised and final terms of the merger were at a 20 percent premium to share price of prior 30 days period, he said adding mergers of this kind in India are usually done at a discount.
Asked if Vedanta has reached out to minority shareholders like LIC for supporting the deal, Albanese said "good constructive discussions with all shareholders" has been held with all shareholders and it was continuing.
"I have been very pleased by the interaction we have been having. I have been encouraged by the constructive, positive nature of the discussion we have had," he said hoping the merger will go through now.
While Vedanta shareholders will vote for the deal on September 8, those of Cairn India will do that on September 12.
For the merger to go through, half of the minority shareholders have to ratify the deal. Vedanta plans to close the transaction by end of March 2017.
LIC, which holds 9.06 percent in Cairn India, was opposed to the deal in the form it was proposed in June last year.
Cairn Energy plc, the former owner of Cairn India, still holds about 10 percent interest in the company.
Vedanta is said to be wanting to use Rs 23,290 crore cash lying with Cairn to pay off part of its Rs 77,952 crore debt.
It had in May rolled over a controversial USD 1.25-billion loan taken from the cash-rich oil explorer Cairn India in July 2014.
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