Cairn India merges with Vedanta Ltd. The board of directors of the two companies have approved of the merger. Stocks of Vedanta India and Cairn India climbed as much as 3.6 per cent in trade following the announcement of merger. Vedanta India jumped 2.8 per cent to hit an intraday high of Rs 189.20 in the morning trades. Cairn India also surged 3.5 per cent to hit its day’s high of Rs 187.15.
Metal and mining company Vedanta Ltd and its subsidiary Cairn India will merge in a deal that will include all shares will give the parent access to Cairn’s $2.7 billion, or about Rs 17,000 crore. This is an amount that will help it reduce debt.
Independent boards of directors of the companies which were owned by billionaire Anil Agarwal, have approved the merger. Minority shareholders of Cairn India will receive one equity share of Vedanta and one redeemable preference share of Rs 10 face value with 7.5% annual dividend, for each share held in Cairn India. Existing Cairn India shareholders will get exposure to metal and mining assets and better shareholder returns.
Ani Agarwal, chairman of Vedanta Plc, mentioned in a statement: “The merger consolidates our position as India’s leading diversified natural resources champion, uniquely positioned to support India’s economic growth.” A diversified portfolio from metal to oil exploration will help Vedanta increase earnings volatility in an economic slowdown, allocate capital to projects with better returns, build a stronger balance sheet and lower overall cost of capital.
Tom Albanese, chief executive at Vedanta Ltd, also mentioned in a statement: “The merger will result in improved financial flexibility to allocate capital to the highest return projects and sustain higher dividends.” He added: “The combined entity is uniquely positioned to help unlock India’s wealth of world class energy and mineral resources.”
Vedanta Ltd, which has already refinanced $400 million is now in the process of refinancing additional $2 billion, or about Rs 12,000 crore, by replacing loans from foreign banks with loans from Indian banks to maintain cost of interest at $7.5% or a shade lower. Experts however expect an improvement due to the merger although there may not be any impact on its earnings per share.
About Vedanta Ltd
Vedanta Resources plc is a global diversified metals and mining company with headquarters in London, United Kingdom. It is the largest mining company in India with operations in Australia and Zambia and oil and gas operations in three countries. Its main products are copper, zinc, aluminum, lead and petroleum. It is managing commercial power stations in India. The company is principally owned by Indian billionaire Anil Agarwal through Volcan Investments. According to the New York Times, Vedanta Resources is “known in some parts of the world for having left financial and environmental problems in their wake.” Vedanta Ltd. Stock market evolution: http://www.bloomberg.com/quote/VED:LN
About Anil Agarwal
Anil Agarwal is the founder and chairman of Vedanta Resources Plc. which he controls through Volcan Investments, a holding vehicle with a 61.7% stake in the business. According to the New York Times, the company is “known in some parts of the world for having left financial and environmental problems in their wake.
About Cairn India
Cairn India is an oil and gas exploration and production company, with headquarters in Gurgaon, India. It is a subsidiary of Vedanta Resources. Cairn India is one of the largest independent oil and gas exploration and production companies in India. Cairn India has a portfolio of nine block located in four strategically focused areas: one in Rajasthan; two on the west coast of India; five on the east coast of India (including one in offshore Sri Lanka) and one in offshore South Africa.
Cairn produces oil and gas from three blocks in India. Top 250 Global Energy Company Rankings by Platts, ranked Cairn India for being the World’s fastest-growing energy company in 2011. Cairn plans to invest $3 billion in the next three years in searching for oil from Rajasthan oilfields. Cairn stock market evolution: http://www.moneycontrol.com/india/stockpricequote/oil-drilling-and-exploration/cairnindia/CI37
About Tom Albanese
Mr. Tom Albanese is the CEO of Vedanta Resources Plc and Vedanta Limited (formerly known as Sesa Sterlite Ltd/Sesa Goa Ltd), a subsidiary of Vedanta Resources Plc. Mr. Albanese was formerly the Chief Executive of Rio Tinto, a global diversified mining company, from May 2007 to January 2013. Mr. Albanese holds a Bachelor’s degree in Mineral Economics and a Master’s in Mining Engineering from the University of Alaska. Mr. Albanese was awarded the ‘Mining Foundation of the Southwest’ 2009 American Mining Hall of Fame Award, for his dedication, knowledge, leadership and inspiration to his peers in the mining industry.