Vedanta in oil business with Cairn
PTI
NEW DELHI, AUG 16
London-listed mining group Vedanta Resources today entered the oil business by clinching a United States dollars 9.6 billion deal for a 60 per cent stake in Cairn India, the owner of India’s largest oilfield.
Vedanta Resources and its group firm Sesa Goa will acquire 40 per cent stake from Edinburgh-based Cairn Energy PLC for USD 6.65 billion and make an open for to acquire another 20 per cent from Cairn India’s other stockholders, Vedanta Resources Chairman Anil Agarwal told Press Trust of India (PTI) over phone.
Cairn Energy, the parent firm of Cairn India, will make up for any shortfall in the open offer, he said. “This deal will give us the world-class Rajasthan oilfields.”
Vedanta will pay Cairn Energy Rs 405 per share, a 32 per cent premium to Cairn India’s average closing price, over 90 days. This includes a Rs 50 per share non-compete premium to Cairn Energy PLC for not entering into oil and gas business in India, Pakistan, Bhutan and Sri Lanka.
The open offer will, however, be made at Rs 355 (offer price minus the non-compete fee).
The process will take about three months to complete, Cairn Energy Finance Director Jann Brown said.
The acquisition will give Vedanta access to the Mangala oilfield, which is currently producing 125,000 barrels per day but has potential to go up to 150,000 bpd (7.5 million tons a year).
The Rajasthan block, where Cairn India has 70 per cent interest, has the potential to go up to 240,000 bpd or equivalent to the 12 million tons per annum output from Oil and Natural Gas Corporation (ONGC) prime Mumbai High fields.
Vedanta’s deal will be contingent on government approval, as Cairn’s three producing oil and gas assets, including the Rajasthan fields and seven exploration blocks, either have explicit provisions for seeking prior approval before transfer of interest or gives pre-emption, or the right of first refusal (ROFR), to partners like ONGC.
“Whatever approvals are required, we will take it. We are a law abiding company and will do what is required in the law,” Agarwal said.
Cairn Energy Chief Executive Bill Gammell said his firm expects government and regulatory approvals as only ownership of Cairn India was changing while it would be business as usual for the India listed firm.
Gammell is visiting New Delhi this week to meet Oil Minister Murli Deora, besides other senior officials.
Oil Secretary S Sundareshan said today the contract for the blocks Cairn India has provision for transfer of part or whole ownership but neither Cairn Energy nor Vedanta has approached it so far.
Cairn India, 62.37 per cent held by Cairn Energy Plc, is valued at about USD 14.4 billion and the Scottish explorer is expected to continue to hold a residual interest of between
10.6 per cent and 21.6 per cent.
