Vedanta, Cairn India say talks with minority shareholders on merger ‘encouraging’

Industry: Mining, Oil and Gas 2016-08-22

MUMBAI/KOLKATA: Top executives of Vedanta Ltd. and oil and gas company Cairn India, which plan to merge, said their interaction with minority shareholders has been encouraging, almost a month after the natural resources conglomerate improved the terms of the proposed transaction.

“We have engaged with all investors and expect to (continue to) do so in coming weeks. We are encouraged by the dialogue and that there has been receptivity,” said Vedanta Chief Executive Officer Tom Albanese. Shareholder voting is scheduled on September 8 and 12.

“We have interacted extensively with minority shareholders for the past couple of weeks. We have received encouraging response from them. They find the exchange ratio very compelling,” Cairn India CFO Sudhir Mathur said.

Under the revised offer, Cairn India’s minority investors will receive one equity share and four redeemable preference shares of Vedanta for each Cairn India share they hold. The initial offer made in June last year was one equity share and one preference share.

Minority shareholders of Cairn India had previously expressed doubt over the advantages of a diversified conglomerate. They had also not found the initial offer attractive enough.

Vedanta and Cairn India have said that the merger will create a commodity cycle-resilient natural resources company.

With the merger, Vedanta, which had net debt of more than Rs 24,654 crore at the end of June, will get access to Cairn India’s cash chest of about Rs 23,400 crore.

Mathur made a case for the merger by saying that Cairn India shareholders will get immense value by gaining access to long-term, low-cost and diversified assets of Vedanta.

Cairn India may scale up its capital expenditure after the merger with Vedanta in the next financial year, following two consecutive years of muted investment due to a steep fall in crude oil prices.

The company had started 2015-16 with plans of investing $1.2 billion and slashed the target for the year to $300 million. The spending plan was further reduced to $100 million in 2016-17.

Metal prices have bottomed out since April and are on their way up, Albanese said, sharing his outlook for the next three to six months. There is a consensus that metals have emerged stronger, he said. Cairn shares have gained almost 20% since the new offer was proposed last month, while Vedanta shares have risen 14%.