Vedanta sweetens Cairn merger deal
Cairn India minority shareholders to receive one equity share and four redeemable preference shares in Vedanta
In a bid to make their merger deal more attractive to minority shareholders, the boards of Vedanta and Cairn India on Friday revised the final terms for the merger deal. The earlier offer saw massive backlash from minority shareholders, who had termed it unfair.
According to the revised terms, Cairn India’s minority shareholders will get one equity share and four redeemable preference shares with a face value of ~10 in Vedanta, for every share held by them in Cairn India. After a period of 18 months, the preference shares will be redeemed. However, shareholders will also have an option to redeem the same within 30 days of allotment.
The share swap ratio translates into an implied premium of 20 per cent to one month volume-weighted average price of Cairn India share price.
The announcement came after market hours on Friday, but in anticipation of the new merger terms, the share price of Vedanta as well as Cairn India surged 7.44 per cent and 8.72 per cent, respectively. Over a month, the stocks are up about 34 per cent and 39 per cent, respectively.
“I am pleased that the boards of Cairn India and Vedanta have approved the terms announced today (Friday). The simplified corporate structure will better align interests between all shareholders for the creation of long-term sustainable value,” Chairman of Vedanta Resources Anil Agarwal was quoted as saying in an exchange filing on Friday.
The revised terms were unanimously approved by the independent and non-conflicted board members of Vedanta Limited, Cairn India and Vedanta Resources plc, considering the prevailing market conditions and underlying commercial factors, the filing said.
Currently, Vedanta holds 59.88 per cent in Cairn India. Life Insurance Corporation of India (LIC) owns 9.06 per cent in Cairn India and 3.9 per cent in Vedanta.
Last week, in response to reports that LIC had given its nod for the deal, the insurer clarified it had not given any such approval.
"Meetings with LIC will also be held in September along with other board meetings," informed the Vedanta management on Friday.
Independent valuers, Price Waterhouse & Co LLP and Walker Chandiok & Co LLP, have provided their joint recommendation on the exchange ratio for the consideration of the boards of Vedanta Limited and Cairn India.
The court-convened meeting of shareholders of Vedanta Limited and Cairn India will be on September 8 and 12, respectively, to discuss and decide on the merger proposal. If the merger goes through, Cairn India's minority shareholders will hold 20.2 per cent stake in Vedanta, while Vedanta's existing minority shareholders will have 29.7 per cent stake in the merged entity. Promoters will own 50.1 per cent in the merged entity. The deal is expected to close in the first quarter of 2017.
The merger is expected to bring down the average cost of debt of Vedanta one per cent, said Albanese.