Vedanta, Cairn India complete merger
The merger of Cairn India with its parent Vedanta was completed on Tuesday, in a move that will consolidate Vedanta’s position as one of the world’s largest diversified natural resources firms. The merged entity will have a larger pro forma m-cap of $15.6 billion.
The merger of Cairn India with its parent Vedanta Ltd was completed on Tuesday, in a move that will consolidate Vedanta’s position as one of the world’s largest diversified natural resources companies. The merged company will have a larger pro forma market capitalisation of $15.6 billion and higher free float of 49.9 per cent.
“Vedanta will have one of the strongest balance sheets in the Indian corporate sector with flexibility to balance capital allocation to the highest return projects while providing a strong and stable dividend,” a company statement said.
The effective date for the merger will be April 11, while April 27 will be the record date.
According to the deal, shareholders of Cairn India will receive, for each equity share held, one equity share of face value of ~1 each and four 7.5 per cent redeemable preference shares (RPS) in Vedanta with a face value of ~10 each. They will also receive an interim dividend of ~17.70 per equity share as approved by the Vedanta board on March 30. Vedanta will arrange for a third-party facility enabling a cash exit for RPS holders at par within 30 days from issuance.
The merger is likely to result in the company being included in the Nifty and the Sensex. Together with weightage increase in key indices like MSCI emerging markets, this will attract more interest of exchange-traded funds (ETFs) and index funds into the shareholder register.
Navin Agarwal, chairman of Vedanta Ltd, said, “We are pleased to have completed the Vedanta Ltd - Cairn India merger and are very excited about the future of the combined company. I would like to thank the shareholders of both companies for their support for this transaction and welcome Cairn India shareholders into Vedanta Ltd’s shareholder register. With world-class assets in metals and mining and oil and gas, Vedanta will fuel India’s economic growth and generate value for all stakeholders.”
Edinburgh-based Cairn Energy will now have a five per cent holding in Vedanta Ltd. Cairn Energy, which is involved in a tax dispute with the Indian government, will also get four preferential shares in the merged entity under a July 22 scheme announced by the Vedanta promoters.
Sudhir Mathur, acting chief executive officer of Cairn India, said, “I am very excited about Vedanta’s commitment to grow our oil and gas business. The merger with Vedanta Ltd will de-risk Cairn India by providing access to a portfolio of diversified tier-I, low cost, long-life assets, to deliver significant near-term growth, while retaining the substantial upside from our oil & gas business.”
Macquarie in its analyst report said the development took Vedanta one step closer towards simplifying its corporate structure. "The fourth quarter of FY17 is set to be a record quarter. We estimate consolidated Ebitda for Vedanta at ~7,340 crore, up 111% Y-o-Y and 25% Q-o-Q. This is helped by a combination of strong commodity prices (zinc and aluminium) and strong volume growth at zinc, aluminium and iron ore divisions," the report said.