Keeping the market conditions in view and having regard to underlying commercial factors, mining billionaire Anil Agarwal-led Vedanta group on Friday announced revised terms for the merger between Vedanta ltd and Cairn India after minority shareholders like the life Insurance Corporation of India (lIC) which opposed the earlier deal.
“Vedanta ltd, Cairn India ltd and Vedanta Resources plc today (Friday) announced revised and final terms to the recommended merger between Vedanta ltd and Cairn India that was announced on 14 June 2015,” said a statement released on Friday.
The development comes at a time when key shareholder Government-owned lIC is yet to give its assent to the merger.
“Pursuant to the revised and final terms, each Cairn India minority shareholder will receive, for each equity share held, 1 equity share in Vedanta, 4 Redeemable Preference shares with a face value of Rs 10 in Vedanta, with a coupon of 7.5 per cent and tenure of 18 months from issuance. Implied premium of 20 per cent to one month volume weighted average price (VWAP) of Cairn India share price,” it added.
Unable to quickly absorb its cash-rich oil subsidiary Cairn India, sweetened the merger deal by offering three additional preference shares. Agarwal had in June last year announced merger of Cairn India with parent Vedanta ltd in a $2.3 billion all-share deal to create India’s largest diversified natural resources company. That time, it was announced that shareholders of Cairn India will get one ordinary share and 7.5 per cent redeemable preference share of Vedanta ltd with a face value of Rs 10.
Terming transaction terms as attractive, the statement said the deal offer exposure to Vedanta ltd’s world-class metal and mining assets, increased free float and trading liquidity and potential re-rating of the merged company. “The simplified corporate structure will better align interests between all shareholders for the creation of long term sustainable value,” said Anil Agarwal, Chairman of Vedanta Resources Plc.
However, Sudhir Mathur, CFO and Acting CEO of Cairn India, said, “Cairn India shareholders will benefit from exposure to a diversified portfolio of world-class, low cost, long-life assets with significant growth. We are confident that the financial strength and diversified portfolio of Tier-I assets will provide de-risked earnings and stable cash flows, driving long-term value. Cairn India shareholders will benefit from the revised terms, while retaining the upside from Cairn’s strong oil & gas assets.”
While Tom Albanese, CEO of Vedanta ltd, said the strategic rationale for merging Vedanta ltd and Cairn India remains highly compelling. Stating that companies with diversified resources have delivered superior returns for shareholders historically, he said, “The transaction consolidates our portfolio of attractive tier-I assets and simplifies the group structure, better positioning the group to deliver superior value to all shareholders over the longer term.”
As the merger between Vedanta and Cairn India was announced on 14 June 2015, in fact, the deal was scheduled to close by March 2016 but a lingering retrospective tax issue and winning over half of the minority shareholders proved the merger to be a stumbling block.