This Article is From Sep 12, 2016

Cairn India Shareholders Approve Vedanta Merger

Cairn India Shareholders Approve Vedanta Merger

Cairn India's minority shareholders will own 20.2% in the merged entity.

New Delhi: Cairn India shareholders on Monday approved merger of the company with its parent Vedanta Ltd after Life Insurance Corporation (LIC) and Cairn Energy plc of UK voted in favour of the sweetened merger ratio.

Requiring support of at least half of the 40.12 per cent minority shareholders of Cairn India, the deal got support of 72.43 per cent of the minority votes, the company said in a regulatory filing.

The voting percentage was indicative of state-run LIC as well as the company's erstwhile parent Cairn Energy plc voting it favour of the deal.

LIC holds a 9.06 per cent stake in Cairn India while Cairn Energy has 9.82 per cent. But of their support the deal could not have mustered the requisite majority support of minority shareholders.

"The scheme has been approved by a majority of the minority shareholders," the filing said, adding that together with promoters, the deal got support of 92.86 per cent of shareholders.

Of the members present and validly voting, "65.41 per cent in number, representing 92.86 per cent in value, voted in favour of the resolution approving the scheme", it said.

"The public shareholders of the company have casted 72.43 per cent of votes (in value) in favour of the resolution."

Talking to PTI, Vedanta Group chairman Anil Agarwal said India should focus on resources below the ground to cut its imports and boost employment.

"We are 85 per cent dependent on imports for our oil needs and 100 per cent for gold and copper. We have resources and it is time that we focus on exploiting them," he said, adding that the merger was aimed at creating a firm that will help monetise them.

Vedanta shareholders had last week approved the merger under a revised all-share deal.

In a bid to salvage the merger of cash-rich oil firm Cairn India with its debt-laden parent Vedanta Ltd, the billionaire Anil Agarwal-led group had in July sweetened the deal by offering three additional preference shares in hope of winning over minority shareholders like LIC.

Through the merger, Mr Agarwal is looking to create India's largest diversified natural resources firm, which could compete with BHP Billiton Ltd and Vale SA.

In the revised offer, Vedanta will give minority shareholders of Cairn India one equity share and four redeemable-preference shares with a face value of Rs 10 each. 

The preference shares will carry a coupon of 7.5 per cent and tenure of 18 months.

Vedanta is said to be wanting to use Rs 23,290 crore cash lying with Cairn to pay off part of its Rs 77,952 crore debt. It had in May rolled over a controversial $1.25-billion loan taken from the cash-rich oil explorer Cairn India in July 2014.

Vedanta Ltd is India's most indebted base metals company. 

For the merger to go through, half of the minority shareholders, who together make up for 40 per cent of the Cairn equity, have to approve the deal.

Post-merger, London-listed parent Vedanta Resources Plc's holding in Vedanta Ltd will drop to 50.1 per cent from 62.9 per cent at present.

Cairn India's minority shareholders will own 20.2 per cent and Vedanta minority shareholders 29.7 per cent in the merged entity.

In June last year, Vedanta Ltd had offered shareholders of Cairn India one ordinary share and 7.5 per cent redeemable preference share with a face value of Rs 10 each.

"I am pleased that the shareholders of Cairn India have approved the merger of Cairn India with Vedanta Limited. We are confident that the financial strength and diversified portfolio of Tier-I assets of the merged company, with strong growth potential, will provide de-risked earnings and stable cash flows and drive long-term value," Cairn India chairman Navin Agarwal said.

Sudhir Mathur, CFO and acting CEO of Cairn India, said, "The shareholders of Cairn India have approved the merger with Vedanta Limited, and I am confident that they will benefit from exposure to Vedanta's diversified portfolio of assets while retaining the upside from Cairn's strong oil & gas assets."

The scheme is now subject to approval of the jurisdictional high courts, and other regulatory approvals, and is expected to be effective by the end of this financial year.

The $2.3-billion all-share transaction was originally announced in June 2015 and the deal to create India's largest diversified natural resources firm, which could compete with BHP Billiton Ltd and Vale SA, was to close in March this year. 

But winning over half of the minority shareholders including LIC, which was said to be opposed to the deal, was providing to be difficult and so Vedanta offered one equity share and four redeemable-preference shares with a face value of Rs 10 each.