Vedanta to buy up to 60% of Cairn India for US$9.6bn

Major international mining group, Vedanta (LON:VED) confirmed its acquisition
of established oil producing assets in India, in a deal with Cairn Energy (LON:CNE) which could be worth as much as US$9.6bn. The company has agreed to buy between 51-60% of Cairn India (BOM:532792) for an aggregate consideration of US$8.5-9.6bn in cash.

The companies said last week they were in talks regarding a transaction.

Vedanta said the deal will create an “Indian natural resources champion”, which will meet the needs of one of the world largest growing economies.

“Cairn India's Rajasthan asset is world class in terms of scale and cost, delivering strong and growing cash flow. The company has a proven management team and very significant further resource potential”, Vedanta chairman Anil Agarwal commented.

“Cairn India will benefit from Vedanta's track record of acquiring and growing world class companies, especially in India."

Under the terms of the deal, Vedanta will buy 51% of Cairn India from Cairn Energy for US$8.4bn and it will also make an open-offer to other shareholders for a further 20% of the business, at 355 rupees (INR) per share. The total equity sold by Cairn will be scaled back depending on the level of open-offer subscriptions.

On completion it is expected that Vedanta will directly hold a 31-40% interest in Cairn India,  its 51%-owned Indian Iron Ore business Sesa Goa will have a 20% stake, Cairn will retain between 10 -21% of the business, and investors on the Bombay Stock Exchange
will hold the remaining equity.

In its reasoning for the transaction, Vedanta highlighted that India imports over two-thirds of its oil consumption. Vedanta emphasised that Cairn India’s Rajasthan assets have the potential to produce more than 240,000 barrels per day, which would represent approximately 25% of India’s total oil production.

“Cairn India represents a unique oil and gas exploration and production platform with the second largest reserves in India among private sector oil companies, a proven management team, and low-cost production”, Vedanta stated.

Currently, Vedanta’s diversified mining assets are based in India, Zambia and Australia, and through its operations Vedanta produces aluminium, copper, zinc, lead and iron ore, as well as commercial energy.

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