Anil Agarwal-owned Vedanta, which is looking to merge its subsidiary Cairn India with itself, has sweetened the deal for its shareholders.
Under the revised offer, Cairn India shareholders will get one Vedanta share for every share they own. In addition, they will get four redeemable preferential shares against the earlier offer of one redeemable preferential share. The preferential shares will have a coupon of 7.5 per cent and a tenure of 18 months. This implies a 20 per cent premium to the one-month volume-weighted average price of Cairn India, a Vedanta statement said.
Following the merger, holding company Vedanta plc’s ownership of Vedanta will decrease to 50.1 per cent from 62.9 per cent now. Cairn India minority shareholders will own 20.2 per cent and Vedanta shareholders will have 29.7 per cent stake in the enlarged entity.Vedanta and Cairn India shareholders’ meeting will be held on September 8 and 12; Vedanta Resources investors’ meeting is scheduled for later that month, said the statement.
The merger proposal has run into many roadblocks since it was proposed in June 2015. Vedanta’s revised offer comes a week after British oil and gas explorer Cairn Energy sued the Indian government for $5.6 billion (₹37,000 crore) in compensation for hurting its business with “unlawful retrospective tax demand” of ₹29,047 crore.
In 2011, the Vedanta Group acquired Cairn India from Cairn Energy plc. In January 2014, the Tax Department slapped a ₹10,247-crore notice on Cairn Energy for alleged capital gains made in the 2006 business reorganisation of its Indian unit before getting it listed. Cairn India has approached the Delhi High Court against the retrospective tax; Cairn Energy is seeking international arbitration.
The Income-Tax Department has frozen Cairn Energy’s 9.5 per cent stake in Cairn India to secure its claim.
A Vedanta official said the contingent liability arising out of the tax dispute would be part of the merged entity.
The Group’s intention to merge companies when the energy and commodity prices are at the lower quartile was also questioned. This apart, it was viewed that the debt-ridden Vedanta is trying to de-leverage its balance sheet by merging itself with cash-rich Cairn India.
Two months ago, Cairn India extended the tenure of the $1.25 billion loan it extended to THL Zinc Ltd, a unit of Vedanta, by two years. The extension follows delay in the merger of Cairn India with its parent Vedanta, which would seen the loans being written off.
Vedanta CEO Tom Albanese said the merger positions the group to deliver superior value to all shareholders over the longer term.