2010-08-31-2010-08-16
To buy 51%-60% of Cairn India Ltd. with 11 blocks in India & Sri Lanka, including the Rajasthan project with 6.5 BBO estimate reserves.
Vedanta Group plans to acquire 51% to 60% of Indian E&P company Cairn India Ltd. from Edinburgh, U.K.-based parent company Cairn Energy Plc for a purchase price between US$8.5 billion and US$9.6 billion in cash.
London-based subsidiary Vedanta Resources Plc will pay between US$5.2 billion to US$6.7 billion for a 31% to 40% direct interest in Cairn India, and Panaji, India-based iron ore company Sesa Goa Ltd. will pay around US$3 billion for a 20% interest. Vendata holds a 57.1% interest in Sensa Goa.
Cairn India was listed on the Bombay Stock Exchange and the National Stock Exchange of India in January 2007. As of Aug. 13, it had a market capitalization in excess of US$14 billion, and is the fourth largest oil and gas company in India. Cairn India has interests in 11 blocks in India and Sri Lanka. The company also holds a 62.4% interest in the issued share capital of Cairn India.
Cairn India's principal asset is an approximate 70% stake in the Rajasthan oil development project. The development has been largely de-risked, with the first phase of development now complete. Currently, Cairn India is producing approximately 125,000 barrels of crude oil per day. The Vedanta board believes that there is the potential to more than double this level. Rajasthan has an estimated reserves base of more than 6.5 billion barrels.
According to Vedanta, Cairn India represents a unique oil and gas E&P platform, with the second largest reserves in India among private sector oil companies, a proven management team and low-cost production. In addition, it increases Vedanta's existing presence in the Indian state of Rajasthan, where it has zinc operations and where the company is the largest tax payer.
Vedanta chairman Anil Agarwal says, "The proposed acquisition significantly enhances Vedanta's position as a natural resources champion in India. Cairn India's Rajasthan asset is world class in terms of scale and cost, delivering strong and growing cash flow. The company has a proven management team and very significant further resource potential. Cairn India will benefit from Vedanta's track record of acquiring and growing world class companies, especially in India."
Vedanta expects to fund the acquisition through debt and cash resources. Vedanta's pro‑forma debt position is supported by its strong balance sheet, and cash flow generation. Sesa Goa will fund its investment primarily from existing cash balances.
The deal is expected to close close by first-quarter 2011.
Vedanta is a diversified natural resources group with primary operations in India.