International Business Assignment No-01 Vedanta-Cairn Deal
Vedanta Resources To Acquire Majority Interest In Cairn India: Strategic
Entry to the Indian Oil and Gas Industry - Deal Analysis.
Details:
London-listed Vedanta Resources Plc is in talks to acquire a majority
51 per cent stake in Cairn India for about $8-8.5 billion (nearly Rs 40,000
crore) and the deal may be announced on Aug 15th evening or on Aug 16.
Scottish explorer Cairn Energy Plc, which holds 62.37 per cent interest
in the India-listed Cairn India, is seeking up to 20 per cent premium for
passing on controlling stake, two persons in know of the development said.
Billionaire Anil Agarwal, who heads Vedanta, "is meeting Cairn Energy
Plc Chief Executive Bill Gammell in London today and the deal is likely to be
announced as early as Sunday evening or on Monday," one of them said.
The deal will be contingent on government approval as Cairn's three
producing oil and gas assets including the giant Rajasthan fields and seven
exploration blocks either have explicit provision for seeking prior approval
before transfer of interest or gives pre-emption or right of first refusal to
partners like ONGC.
The sources said Cairn Energy has been in talks with Vedanta for three
weeks now and talks centre around selling majority stake. "If Cairn Energy
was to sell a minority 10-12 per cent stake, they would have done that on
the stock exchange. Moreover, it does not make sense for an investor like
Vendata to make portfolio investment," a report said.
Upon acquisition of majority stake, Vedanta Resources will have to
make an open offer for additional 20 per cent stake and may even choose to
delist. However, India's market regulator Sebi has now proposed for revising
open offer size to up to 100 per cent, in which case the buyer would have to
offer to acquire the entire company.
Cairn Energy Plc, which has kept the management of its subsidiary out
of the talks, today deputed Cairn India CEO Rahul Dhir to brief the
government whose approval is crucial for the deal to go through.
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International Business Assignment No-01 Vedanta-Cairn Deal
Summary:
Vedanta Resources Plc. (Vedanta) entered into a conditional agreement to
acquire a 51% to 60% stake in Cairn India Limited (Cairn India), a
subsidiary of Cairn Energy Plc. (Cairn Energy). The transaction is estimated
to be worth in the range of $8,500m to $9,600m in cash, subject to
adjustments. Vedanta will acquire shares from Cairn Energy at a price of
(Indian Rupees) INR 355 per share ($7.48 per share) and also pay a non-
compete fee of INR 50 per share ($1.05 per share). The offer price
represents a premium of approximately 32% to the Cairn India average
closing price for 90 days prior to August 14, 2010. Vedanta will fund the
acquisition through debt and cash resources whereas Sesa Goa will fund its
investment primarily from existing cash balances.
Standard Chartered Bank; Credit Suisse; Goldman Sachs; J.P. Morgan
Cazenove and Morgan Stanley are acting as financial advisors to Vedanta for
this transaction. NM Rothschild & Sons Limited is acting as the sole financial
advisor to Cairn Energy with respect to the transaction. The transaction is
expected to close by the first quarter of 201.
Scope:
Rationale behind Vedanta acquiring stake in Cairn India
Strategic Benefits for the companies involved
Geography covered -India
Reasons to buy:
Develop a sound understanding of the major M&A's, Partnerships, And
Joint Ventures taking place in Asian Oil & Gas industry
Identify the most lucrative segments to leverage on the growth
opportunities available in the Indian oil & gas market
Get a detailed analysis of a deal to enable you to take better decisions
Saket College of Management, Kalyan Page 2
