Vedanta Resources will acquire 51 per cent in Cairn India
Cairn Energy Plc the the parent company will offload its 51 per cent stake in Cairn India to Anil Agarwal’s Vedanta Resources. The transsaction is valued at US $8.5 billion to 9.6 billion, a move that would represent Vedanta’s first foray into oil and gas, and help Edinburgh-based Cairn Energy fund an expensive drilling programme in Greenland.
Cairn Energy plc has invested close to US $3.5 billion in Cairn India’s Rajasthan assets for exploration and development. According to the Cairn management the Cairn India board under Rahul Dhir will continue to stay put as of now.
Highlights of the deal
* Vedanta to acquire 51 per cent to 60 per cent of Cairn India Limited
* Consideration of approximately US $8.5-9.6 billion in cash
* Vedanta Resources plc will hold 31-40 per cent of Cairn India directly
* Sesa Goa Ltd will hold 20 per cent
* Transaction to be funded through debt and cash resources
* Immediately EPS accretive
* Proposed transaction is expected to close before end of 2010
Deepak Jasani, head of retail research, HDFC Securities:
“For Cairn Energy it seems like a good deal to me and Vedanta, though it is their first foray into oil and gas business, it is yet another commodity business for them apart from metals and ores. “For Sesa Goa, I do not see it as positive because their cash will get used up with no obvious benefits to them in the near term.”
Deven Choksey, MD & CEO, KR Choksey shares:
“Cairn India has extracted a part of resources in Rajasthan. It looks like they want to monetise some assets and look for opportunities elsewhere.”For Vedanta, its a win-win situation. They are already into natural minerals and oil and gas will be an extension in the resources field. They are also buying at a valuation which is not expensive.”
Alex Mathew, head of reseacrh, Geojit BNP-Paribas Financial service:
“With this deal, Vedanta is looking to become a company with the scale of something like BHP Billiton. It shows the company wants to be become a major resources player.”
K K Mita, head of portfolio management services, Globe Capital:
“This is going to be an entry point for Vedanta in the oil and gas sector, and after this deal the company may also look for some acquisitions somewhere else to boost its interest in the exploration business.”
“Cairn India shares are down mainly because reports that Vedanta will make an open offer for Cairn India shareholders for about 355 rupees per share, which is disappointing to some investors who had taken positions hoping that the offer would be more than 400 rupees.”
Neeraj Dewan, director, Quantum Securities:
“The price Rs 405 includes a non-compete fee of Rs 50. That means the open offer for Cairn India will come at Rs 355. So the shares will be capped at around that.”
Gajendra Nagpal, CEO, Unicon Financial Intermediaries:
“On the face of it, looks like they are paying a little more than what the market would be excited about. At Rs 405, good for existing Cairn India shareholders. And also with Vedanta entering the oil and gas space, speaks of the potential of the sector.” Agencies
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