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Mining & oil giants in mega merger.

Vedanta to absorb Cairn India in $2.3- bn deal to cut big debt

I N A major restructuring of the Anil Agarwal Group, mining company Vedanta Limited will absorb cash- rich oil firm Cairn India in a $ 2.3 billion all- share deal that will help parent Vedanta Resources to repay its huge debt burden.

Shareholders in Cairn India, which operates the lucrative Rajasthan oilfields, will get one ordinary share and 7.5- per cent redeemable preference share of Vedanta Limited with a face value of ` 10. This works out to a premium of 7.3 per cent to Cairn's closing stock price on Friday.

Vedanta will use the ` 16,867- crore cash pile with Cairn to pay off part of its whopping ` 77,752- crore debt.

The merger is the second step in the series that started in 2013 towards simplification of the Agarwal Group's corporate structure. Vedanta, previously known as Sesa Sterlite, in 2013 consolidated its iron ore mining business by merging Sesa Goa with Sterlite Industries ( India),

which ran copper and aluminium businesses.

The merger with Cairn would take former scrap- dealer Agarwal a step closer to achieving his ambition of building an Indiaintegrated resources Group on the lines of Rio Tinto or BHP Billiton.

The move needs approval of 50 per cent of minority shareholders of Cairn India, including its former parent Cairn Energy, which owns 9.8- per cent of total shares, and state- run insurance company LIC, which owns another nine per cent.

A Cairn Energy spokesperson said that the company would assess whether the proposal is in the interests of Cairn Energy Plc as a shareholder in Cairn India in due course.

The transaction is targeted to be closed by March 31, 2016, and would need approval of Bombay Stock Exchange, National Stock Exchange, Securities and Exchange Board of India, High Court as well as ministry of petroleum for transfer of Cairn India's interest in oil and gas blocks.

" The merger will help Cairn spread its risk from volatile oil business to other metals and commodities," Vedanta chief executive Tom Albanese told news agency PTI in an interview.

Vedanta is also facing a ` 20,495- crore tax notice from the income tax department in relation to Cairn India's 2007 listing. That liability and a $ 1.2- billion inter- company loan advanced by Cairn India to its parent last year were factored into the deal, Vedanta chief financial officer DD Jalan said. He also said the cash at Cairn and debt at Vedanta have been duly considered in arriving at valuation and the swap ratio.

The move needs approval of 50% of minority shareholders of Cairn India and LIC

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Publication:Mail Today (New Delhi, India)
Geographic Code:9INDI
Date:Jun 15, 2015
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