Monday, August 16, 2010

Vedanta to buy majority stake in Cairn India

Vedanta Resources said Monday that it would buy from Cairn Energy a stake in its Indian subsidiary for up to $9.6 billion in cash, acquiring with the deal Cairn’s huge Rajasthan oil field with plans to bolster India’s domestic oil production.Vedanta, headed by the mining billionaire Anil Agarwal and headquartered in London, said it would pay 405 rupees, or $8.66, per share of Cairn India, a premium of about 32 percent over recent share prices.The company will buy between 21 and 40 percent of Cairn India, while collaborating with the Indian iron ore producer Sesa Goa to make a tender offer for another 20 percent of Cairn diluted shares.Vedanta said it was financing the deal with debt and internal cash reserves, and intended to build up an “Indian natural resources champion” using the company that produces 125,000 barrels of crude per day from the Rajasthan field, and which sits on an estimated 6.5 billion barrels of oil and gas.“Cairn India represents a unique oil and gas exploration and production platform with the second-largest reserves in India among private sector oil companies, a proven management team, and low-cost production,” Vedanta said.India currently needs to import two-thirds of the oil it consumes to fuel its dramatic economic growth, with that share expected to increase in coming years — a trend Vedanta hopes to curb.Cairn, which now owns 62.4 percent of its Indian arm, said in a separate statement Monday that much of the cash would go to its shareholders, with the rest financing exploration in Greenland, where it has a major presence. The company, based in Scotland, will keep a minority stake in Cairn India of between 10 percent and 21 percent.Cairn India, listed on the Bombay Stock Exchange, is one of the largest oil and gas companies in the country.The deal is expected to close by the first quarter of next year at the latest. It has been cleared with regulators but awaits shareholder approval at both companies.Standard Chartered Bank led the financing and advising of Vedanta, with J.P. Morgan Cazenove and Morgan Stanley serving as joint lead advisers and sponsors, and Credit Suisse and Goldman Sachs acting for joint financing and advising.

The proposed takeover of Cairn Energy's India business could see NRI billionaire Anil Agarwal emerging as the richest promoter of a corporate house ahead of Mukesh Ambani, who has ruled the list for a long time.After the acquisition of Cairn India and a proposed IPO of group firm Sterlite Energy, Anil Agarwal, as head of the promoter family, would command an estimated networth of close to Rs. 1,67,000 crore, ahead of Mukesh Ambani at Rs. 1,45,275 crore, a comparison of promoter family holding valuations for leading groups reveals. (Pics: Wealthiest Indians)However, Mukesh-led RIL is a wealthier group than Agarwal's Vedanta, although both are behind the Tatas, whose market capitalisation in terms of listed entities is over Rs. 3,70,000 crore.However, in terms of promoters' wealth, Tata group chief Ratan Tata hardly compares to either Mukesh or Agarwal. In their own respective fields of business, Agarwal is a global leader in the metals and mining, while Mukesh is among the top-ranked international players in the fields of petrochemicals and largest private sector oil group in India.Agarwal is now entering oil business through the Cairn India acquisition and his capacity to play to the size could now make competition intense in oil sector. At the same time, the acquisition would give the Agarwal family double the size of Anil Ambani group (whose promoter wealth currently stands at less than Rs. 80,000 crore).The USD 9.6 billion takeover of Cairn India has already pushed Vedanta group head Anil Agarwal to the second position after Mukesh Ambani in terms of family net worth, measured in terms of value of shares held as promoters in five listed group companies.Add to this, the value of shares he holds in aluminium major Balco and IPO-bound group firm Sterlite Energy, the promoter family wealth of Anil Agarwal group could rise to nearly Rs. 1,66,938 crore.In comparison, the promoter family wealth of Mukesh Ambani group currently stands at Rs. 1,45,276 crore, based on the value of promoter holdings in two listed group firms Reliance Industries and Reliance Industrial Infrastructure. Without Sterlite Energy, which has proposed an initial public offer of Rs. 5,100 crore, and Balco, where Vedanta group has 51 per cent stake, the total promoter family networth of the Vedanta group currently stands at Rs. 1,38,465 crore.This includes the value of promoter shares in Sterlite, Hindustan Zinc, Sesa Goa (all listed in India) and that in UK-listed Vedanta Resources, as also the worth of proposed 60 per cent stake in Cairn India proposed to be purchased from Scotland-based Cairn Energy.The total networth would rise by over Rs. 28,000 crore if Balco is taken at par with its peer group company Nalco, which has a market cap of Rs. 25,830 crore, and the group offloads 25 per cent stake in Sterlite Energy to raise Rs. 5,100 crore.