After two years of negotiations with minority shareholders, facing regulatory hurdles and a lingering Rs 30,000-crore (including penalty) retrospective tax issues, the merger of cash-rich Cairn India with Vedanta is finally done. The merger – a $2.3 billion all-share deal — will consolidate Vedanta’s position as one of the world’s largest diversified natural resources companies like BHP Billiton and Rio Tinto and the merged entity will have a pro forma market cap of $15.6 billion. The merger will help Vedanta Resources reduce its debt. At the time of the merger talks, Cairn had cash and cash equivalents of about Rs 25,000 crore, while Vedanta had about Rs 78,000 crore of debt.
The company has fixed April 27 as the record date for determining the list of the shareholders of Cairn India to whom the equity and preference shares of Vedanta Ltd (earlier known as Sesa Sterlite) will be allotted. As decided during the merger, for each equity share held in Cairn India, investors will receive one equity share and four redeemable preference shares in Vedanta. Also, Cairn India shareholders will become shareholders of Vedanta and will receive an interim dividend of Rs 17.7 per equity share as approved by the board of Vedanta on March 30, 2017.
Resistance for the deal
The deal faced stiff resistance from Cairn India shareholders including Life Insurance Corporation of India (LIC), which has 9% stake in the company. In order to sweeten the deal, Vedanta and Cairn had announced a revised deal, or a sweetener, in July last year in which Vedanta offered minority shareholders of Cairn India one equity share and four redeemable preference shares with a face value of Rs 10 each. The preference shares will carry a coupon of 7.5% and tenure of 18 months. The revised deal implied a 20% premium to the one-month volume weighted-average price of Cairn shares. The earlier deal in 2015 was one equity share and one redeemable preference share.
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