Vedanta Shareholders Approve Merger With Cairn India

Shareholders of mining and energy conglomerate, Vedanta Ltd., on Friday approved the proposed merger with its subsidiary Cairn India Ltd. Promoter Anil Agarwal is looking to create India’s largest diversified natural resources firm through the merger, which could compete with the likes of BHP Billiton and Vale SA.

After Friday’s approval, each shareholder of Cairn India will get one equity share and four redeemable preference shares with a face value of Rs 10 each in Vedanta, according to the revised terms of merger Vedanta had filed on the Bombay Stock Exchange on July 22. The preference shares will carry a coupon of 7.5 percent and tenure of 18 months.

The equity shareholders, secured creditors and unsecured creditors of Vedanta Ltd. at their respective meetings have approved the Scheme of Arrangement of Cairn India Ltd. with Vedanta Ltd., with requisite majority.
Vedanta Statement

The development brings the firm, led by billionaire Anil Agarwal, a step closer to the merger of the cash-rich oil firm Cairn India with its debt-laden parent Vedanta. However, the real test for Agarwal is on September 12, when Cairn India has called a shareholders’ meeting to seek approval for the company’s takeover by its parent under a revised all-share deal.

For the merger to go through, half of the minority shareholders, who together make up for 40 percent of the Cairn equity, have to approve the deal.

The merger gives Vedanta access to cash in the books of Cairn India. Cash and cash equivalent in the books of Cairn India stood at Rs 19,500 crore at the end of June 30, 2016, according to an investor presentation on the company’s website. This compares to Rs 16,500 crore that it had at the end of June 30,2015. Vedanta’s increased offer is less than the cash added by Cairn India in the last one year.

The government-controlled LIC holds 9.06 percent in Cairn India while the company’s former promoter Cairn Energy Plc of the U.K. holds 9.82 percent, according to information on the company’s website.

Post-merger, London-listed parent Vedanta Resources Plc’s holding in Vedanta will drop to 50.1 percent from 62.9 percent. Cairn India’s minority shareholders will own 20.2 percent and Vedanta minority shareholders 29.7 percent in the merged entity.