press trust of india, New Delhi, June 9: Billionaire Anil Agarwal-led group plans to merge its cash-rich oil firm Cairn India Ltd with its flagship metals and mining company Vedanta Ltd in an all-share deal aimed at trimming the group’s huge debt.
The merger will help cut Vedanta’s Rs37,636cr gross debt by using Rs16,870cr cash lying with Cairn as well as over Rs14,000cr of cash the firm generates every year.
Shareholders of Cairn India, which has seen stock prices plunge from Rs385 in June last year to Rs172.60 at close of trading on BSE Tuesday, will be issued shares of Vedanta Ltd – formerly Sesa Sterlite, sources with direct knowledge of the development said.
Boards of the two firms are likely to consider the merger proposal soon and the transaction is targeted for completion by March next year, they said.
Agarwal’s London-listed Vedanta Resources in a regulatory filing said, “Should a transaction with Cairn India Ltd proceed, it could potentially be considered a reverse takeover.”
Vedanta had in 2011 acquired majority control of Cairn India for USD 8.67 billion. It held 59.9 per cent in the oil explorer through its various units as on March 31.
As a prelude to the merger, Vedanta had this month bought some of the shares held by Agrawal’s Twin Star Mauritius Holdings to raise its stake in Cairn India to 23.71 per cent from 18.73 per cent. Twin Star now holds 34.43 per cent in Cairn India.
Simplify and consolidate strategy
To local bourses, Vedanta said, “Company’s stated strategy is to simplify and consolidate its corporate structure. Management reviews options to deliver this strategy on an on-going basis.”
British oil explorer Cairn Energy, which had sold majority of its stake in Cairn India to Vedanta, still holds 9.8 per cent in the oil firm. It has however been restrained by the Income Tax department from disposing of its shares pending Rs10,247cr tax demand.
Sources said however that it was not being seen as an impediment in the merger because Cairn Energy will get shares of Vedanta Ltd in proportion to the merger ratio.
This shareholding will continue to be locked till resolution of the tax dispute, they said.