About Cairn India

Cairn Energy plc is a global oil and gas exploration company headquartered in Edinburgh, United Kingdom. It has operational interests in Albania, Bangladesh, Greenland, India, Nepal and Tunisia and produces around 33,000 barrels of oil equivalentper day. Its largest activities are in India, where it has made more than 20 discoveries in Rajasthan, including a major oil discovery in Mangala. As at 30 June 2010 it had total proven commercial reserves of 247.4 million barrels of oil equivalent. Its primary listing is on the London Stock Exchange and it is a constituent of the FTSE 100 Index. It has a secondary listing on the Bombay Stock Exchange.

About Vedanta Resources

Vedanta Resources plc is a global mining and metals company headquartered in London, United Kingdom. It is the largest mining and non-ferrous metals company in India and also has mining operations in Australia and Zambia. Its main products are copper, zinc, aluminum, lead and iron ore.
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It is also

developing commercial power stations in India in Orissa (2,400 MW) and Punjab (1,980 MW). It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Highlights of the deal

The Cairn-Vedanta deal has the classic makings of a corporate merger drama. Eight months ago, Cairn Energy made a deal with Vedanta Resources to sell a controlling interest in its Indian arm, Cairn India, for $9.6 billion.

About the Deal

Vedanta Resources has bought a 10.4 percent stake in Cairn India, pushing ahead with plans to take control of the Indian oil and gas company despite regulatory delays plaguing the $9.6 billion deal. Vedanta's move to acquire Cairn India is part of London-based mining magnate Anil Agarwal's plans to grab a slice of India's oil reserves and get exposure to surging demand.

But its agreement to buy a 40 percent to 51 percent stake from Cairn Energy has yet to be cleared by the Indian government. London-listed Vedanta said on Tuesday it expected to own between 51 and 70.4 percent once the deal and an ongoing open offer to Cairn India minority shareholders were complete. Vedanta said on Tuesday that it bought the stake -- 200 million shares -- from Malaysia's national oil corporation Petronas for 331 rupees ($7.40) a share, below the price being offered to minority shareholders in the open offer by Vedanta unit Sesa Goa and reflecting a 1.6 percent discount to Cairn India's closing price on Monday. Vedanta said it was offered only the shares it eventually bought. Petronas sold the remainder of its stake, around 4 percent, to foreign portfolio investors, a source familiar with the matter told Reuters. Analysts said Vedanta's stake purchase in Cairn India would be useful if it failed to get a big response from minority shareholders for its open offer. "This is a strategic move by Vedanta, and it makes the open offer inconsequential," said Jagannadham Thunuguntla, head of research at brokerage SMC Global Securities. "Vedanta will now be able to get a comfortable controlling stake in Cairn India even if the open offer response is very poor," he said. "But all this is subjective to the government clearing the deal, and that is an unknown factor." Cairn India did not respond to calls seeking comment on the block deal. Petronas confirmed it had sold its stake. LONG-AWAITED APPROVAL "What this says is (Vedanta) are serious about the deal. They are putting their money where their mouth is, signalling intent and perhaps subtly turning up the pressure (on the Indian government)," a London-based analyst told Reuters. Vedanta's deal to buy a majority stake in India's No. 4 oil and gas firm has been caught up in a dispute over royalty payments, and the two sides have been waiting for government approval. The offer by Sesa Goa to buy up to a 20 percent stake in Cairn India was launched on April 11 and closes on April 30. Cairn India saw 283 million shares, or 14.9 percent of its share capital, changing hands in block share market deals on the Bombay Stock Exchange on Tuesday. Vedanta will join BHP Billiton as the only miners with large oil interests. It has said Cairn India has the potential to almost double current production to about 240,000 barrels of oil per day -- around a quarter of India's output -- allowing it to benefit from rising demand spurred by industrialisation, economic growth and an expanding population. Bank of America Merrill Lynch represented Petronas in the deal.

Cairn India Highlights

Large resource base with significant growth potential 2P reserves and 2C resources of 890mm boe1 Estimated gross initial in place volumes of 6.5bn boe2 Significant near-term upside: potential for 300mm boe 2P reserves via EOR; 20 additional discoveries and over 35 prospects

Key producing asset substantially de-risked 125,000 bopd production in H2 2010, plan to reach at least 240,000 bopd Low cost producing assets Low cost F&D platform ($5/bbl), low opex ($5/bbl) Deep skill sets in oil & gas High quality management team Unique position in Rajasthan Excellent HSE track record

Will Vedanta Resources succeed in getting open offer of 20%

Vedanta will make an open offer of 20% at not less than Rs355 per share to other shareholders of Cairn India is the 2nd stage of the deal once it is approved by the Indian Government. The final stake bought from Crain Energy would depend on the response to a public offer which opens on 11th October, 2010 announced by Vedanta Resources Plc. The attraction of open offer of 20% in Crain India Ltd.:1) Crain India Ltd has70 % stake holding in an oil block in Rajasthan that has potential to pump 2,40,000 barrels per day which is around 1/4th of Indias total output. 2) Have a successful exploration business scaled up with very little debt and Positive Cash flows, 3)Vedantas offer values Crain Energy at around 17 times one-year forward earning per share too much higher bid which attract investor easily but make the deal costly for Vedanta. 4) Recent discovery of oil field named Krishna Godavari basin . 5) The hidden strength of Vedanta is ability to operate in sectors where politics and policy impacts business. 6) Strong investment plan and indeed cash-rich. 7) A member of the FTSE index of Britains largest firms.

The disappointed points for new investors:Ist Sesa Goa is offering to buy minimum 20% from public. Then based on the response, Vedanta will buy 40-51% from Cairns. That means Vedanta wants to hold only 60% in Cairn. Already ONGC is against Vedanta into oil filed. ONGC is not interested for Vedanta as they dont have experience in oil field. Doesnt have experienced in Oil and Gas exploration business. LIC which holds a 2.6% stake in Crain India may not tender its share unless it gets what the U.K. parent is offered.

The timing of the offer helped save Vedanta to the tune of $9 billion. The strategy used by Vedanta Resources are As per proposed takeover norms Vedanta is saving $9 billion Vedanta's offer to pay Rs 50 per share premium asnon compete fee to Cairn India Ltd. to shareholder will not be permitted under the new takeover norms. Uniform pricing on shares not applicable at the moment. As per SEBI proposed norm which provide each shareholder an opportunity to exit their investment on terms that are not inferior compared to `substantial shareholders. SEBI has proposed a takeover code that would trigger need to extend open offer for 100% of the shares unlike current need for 20% of a company when threshold shareholding levels are reached (proposed 25% from the current 15%). This would substantially raise the cost of acquisitions. Therefore when the above proposals get implemented and if the deal will not closed then Vedanta will lose the timing offer of $9 billion.

Strategy used by Vedanta resources:-

Vedanta uses its stated strength of assets optimization and cost reduction to perhaps extract more profits creates cash flows.

First Sesa Goa is offering to buy minimum 20% from public. Then based on the response, Vedanta will buy 40-51% from Cairn India Ltd.

Then in this case Vedanta holds only 60% shares in Cairn India. If we suppose that they buy 51% from cairn and then float minimum 20% public buy tender, and they get more than 20%, they will end up holding more than 70% which is may be out of reach of Vedanta Resources.

The impact of the deal on Vedanta resources

Share price of Vedanta resources fell down and Cairn India gained.The major concern for this is diversifying from mining & metals into oil & gas and funding the proposed transaction. Cairn Indias market cap is approx Rs.67,000 crore and a 26-51% stake will cost it around Rs 17,000- 34,000 crore. Vedanta Resources Plc share price felled down by 5.5 % to 20.61 pounds in London Stock Exchange. Sterlite Industries a Vedanta Group firm also fell down by over 4 % to close at Rs 160.70 in Bombay Stock Exchange .At the end of the trade on 20th August Sterlite was the biggest loser

Cairn India Vedanta deal approved by the government More than 10 months after USD 9.6 billion-deal was first struck, the government on Thursday gave its approval to Cairn Energy for selling its Indian unit to Vedanta Resources, subject to the new owner agreeing to share royalty and pay oil cess on mainstay Rajasthan oilfields. The Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Manmohan Singh approved the sale with the preconditions that Cairn or its successor has to treat royalty payments on Rajasthan oilfields as recoverable from oil sales, Oil Minister S Jaipal Reddy told reporters in New Delhi. Also, Cairn India will have to withdraw the arbitration it has initiated disputing its liability to pay Rs 2,500 per ton oil cess on its 70 per cent share in the fields. Besides, the approval will be subject to ONGC, which has a stake in all the three oil and gas producing properties and five out of seven exploration assets of Cairn India, waiving its pre-emption rights, which Reddy termed as the partner's no-objection certificate (NOC). He said the deal would also need the security clearance.

"The CCEA endorsed the recommendation of a Group of Ministers headed by Finance Minister Pranab Mukherjee, which was asked to go into the transaction," he said. Asked if the report of the Serious Fraud Investigation Office (SFIO), which had found Vedanta group firm Sesa Goa guilty of misconduct, would in anyway affect the government approval, Reddy said he has communicated the decision taken by the CCEA. Refusing to say if the SFIO report was discussed, he said "The CCEA records decision not the thoughts." Last August, London-listed miner Vedanta proposed buying 51-60 per cent of oil and gas explorer Cairn India for up to USD 9.6 billion in cash, but the deal has been delayed due to a lack of government and regulatory approvals. Approval has been delayed over royalty payments that ONGC makes on behalf of Cairn India in Rajasthan oilfields. ONGC owns a 30 per cent stake in Cairn India's Rajasthan oil field but pays the entire royalty on production under the government's previous policy of giving discounts to attract investors.

Current Status:-

ONGC may give consent on Sept 27 for Cairn-Vedanta deal:

State-owned Oil and Natural Gas Corp (ONGC)on Tuesday said it may on September 27 decide on giving its consent to UK's Cairn Energy Plc selling majority stake in Cairn India to London-listed Vedanta Resources. ONGC, which holds stake in 8 out of the 10 oil and gas properties Cairn India has in the country, holds pre-emption or right of first refusal. Cairn Energy has agreed to accept all government conditions, including sharing royalty and paying cess on the all important Rajasthan oil block. Since, Cairn India is opposed to the riders, it has demanded that company shareholders should vote on acceptance of them. Cairn Energy with 52.11% stake and Vedanta's 28.5% are all set to overrule Cairn India and accept the conditions.

Vedanta's deal to buy Cairn's India assets, which would be the biggest acquisition in the Indian oil sector, is widely seen as a litmus test for foreign investment into India.

http://freemanstrikes.blogspot.com/2011/04/cairn-vedanta-deal.html en.wikipedia.org/wiki/Cairn_Energy en.wikipedia.org/wiki/Vedanta_Resources http://www.hindustantimes.com/May-give-consent-on-Sept-27-for-Cairn-Vedanta-dealONGC/Article1-739676.aspx