A slippery deal

16 August 2010 By Una Galani Follow @ugalani

The miner and one of its listed subsidiaries are buying up to 61 percent of the Indian oil producer for as much as $9.6 billion. Vedanta has no oil experience and the move will test its credit rating. Meanwhile, minority shareholders on all sides are getting a raw deal.

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Londonlisted miner Vedanta Resources said on Aug. 16 it would spend between $8.5 billion and $9.6 billion to acquire between 51 percent and 60 percent of oil producer Cairn India.

The group controlled by Indian billionaire Anil Agarwal will buy between 40 and 51 percent from Cairn Energy, which owns 62.4 percent of the Indian listed group, for 405 rupees per share or a 22 percent premium to the undisturbed share price on Aug. 11.

Vedanta will also launch a public tender offer for 20 percent of Cairn India through its iron ore subsidiary, Sesa Goa, at a price of 355 rupees per share. The subsidiary will fund its part of the acquisition using existing cash.

Cairn Energy will retain a stake of between 10.6 and 21.6 percent in Cairn India, depending on the uptake of the public tender offer. Cairn India will remain listed on the Bombay Stock Exchange.

A group of banks led by Standard Chartered have agreed to provide Vedanta with new debt facilities worth $6.5 billion with a minimum maturity of two years, according to people familiar with the situation.

Vedanta were up 116 pence at 2178 pence at 1000 GMT on Aug. 16. Cairn India shares were down 5.5 percent at 335 rupees. Sesa Goa shares were down over 8 percent at 325 rupees.

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