Vedanta Resources, the Indian mining group controlled by billionaire Anil Agarwal, has offered improved terms for a proposed deal to take greater control of its main oil and gas business.
Vedanta wants to tighten its grip on Cairn India to get better access to the cash on the oil group’s balance sheet and simplify its convoluted corporate structure but the plans have stalled for more than a year.
The deal would merge Vedanta Limited, the Indian-listed subsidiary of Mr Agarwal’s UK-listed group, with Cairn India. Vedanta Limited already owns almost 60 per cent of Cairn India, while Vedanta Limited is in turn 63 per cent owned by Vedanta Resources.
Vedanta has suggested the deal as a way for Cairn India shareholders to access a more diversified resources group, but it has only won lukewarm support for the terms offered when the plan was announced more than a year ago.
Cairn Energy, the UK-listed group that sold its Indian operations to Vedanta and remains one of Cairn India’s two large minority investors, had particular doubts about the proposed deal. Cairn Energy could not be reached for comment on Friday.
Vedanta Limited is now offering one of its own shares and four redeemable preference shares for each share in Cairn India, as opposed to the single share and one preference share that was offered last year.
The enhanced terms, including a 7.5 per cent interest bearing coupon on the preference shares, mean the offer is worth a fifth more than the average price at which Cairn India shares have traded over the past month, Vedanta said. The original deal offered a 7 per cent premium on a comparable basis.
Tom Albanese, chief executive at Vedanta, said a merger was “highly compelling”.
“Diversified resources companies have delivered superior returns for shareholders historically. The transaction consolidates our portfolio … and simplifies the group structure,” he said.
Vedanta’s other operations include zinc, aluminium, copper and iron ore mining.
The deal would also help Vedanta, which has more than $7bn of net debt, make use of more than $3bn of cash within Cairn India.
A majority of independent investors in both Cairn India and Vedanta Limited have to vote in favour of the deal. Like Cairn Energy, India’s state-run Life Insurance Company also owns about 10 per cent of Cairn India.
If the deal proceeds then Vedanta Resources would own just over half of an enlarged group. Cairn India shareholders would hold 20 per cent of the shares in Vedanta Limited.
