Sesa Goa Offers to Buy Shares of Cairn India Between April 11 and April 30

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Vedanta Resources Plc (VED) will start an open offer for Cairn India Ltd. (CAIR) shares through unit Sesa Goa Ltd. (SESA) on April 11, taking billionaire Chairman Anil Agarwal a step closer to acquiring the nation s biggest inland oil field.

 

The proposal to minority shareholders to buy as much as 20 percent of the Cairn Energy Plc (CNE) unit will close on April 30 and be managed by JM Financial Consultants Pvt. , Sesa said today in a newspaper advertisement. Sesa offered 355 rupees for each share, about 3 percent less than the closing price in Mumbai yesterday. The company has the option to increase the offer price by April 19, it said.

 

Vedanta, a copper and aluminum company with no experience in producing oil or natural gas, has waited almost eight months to buy as much as 60 percent of Cairn Energy s Indian unit, including Sesa s open offer. Agarwal said yesterday Vedanta won regulatory approval for its bid. The deal is likely to be cleared by the Cabinet today, the Press Trust of India reported.

 

 There was uncertainty over the deal and now with this approval, the conclusion is one step closer, said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi.

 

Cairn India declined 1. 1 percent to 361. 25 rupees in Mumbai trading at 10:52 a. m. Sesa climbed as much as 5. 2 percent to 331 rupees and was at 324. 30 rupees. The benchmark Sensitive Index fell 0. 5 percent.

Cash Purchase

 

Sesa, the nation s largest iron-ore exporter, will spend as much as $3 billion in cash to buy the shares, Agarwal said yesterday at a conference in Mumbai. Vedanta offered Cairn Energy 405 rupees a share, including a non-compete fee of 50 rupees a share, according to a statement to the Bombay Stock Exchange on Aug. 18.

 

Phone calls to the office of Oil Minister S. Jaipal Reddy yesterday went unanswered. N. Hariharan, a spokesman for the stock market regulator, declined to comment in a mobile-phone text message.

 

Crude oil in New York has climbed 44 percent since Vedanta and Cairn Energy announced the transaction on Aug. 16. Oil for May delivery traded 0. 2 percent lower at $108. 15 a barrel in electronic trading on the New York Mercantile Exchange at 12:25 p. m. in Singapore.

Raising Debt

 

The final number of shares to be sold by Cairn Energy to Vedanta will depend on the result of the open offer. Vedanta said Aug. 16 it may pay as much as $9. 6 billion for the Cairn India stake.

 

Vedanta has raised $6 billion in debt to fund the acquisition, Agarwal said in Mumbai yesterday. Sesa s offer to Cairn India shareholders will open for subscription next week, he said.

 

The money will be borrowed from Barclays Capital, Citigroup Inc. , Credit Suisse Group AG, Goldman Sachs Group Inc. , JPMorgan Chase & Co. , Morgan Stanley, Royal Bank of Scotland Group Plc and Standard Chartered Plc, Vedanta said in a Nov. 19 statement.

 

State-run Oil & Natural Gas Corp. , Cairn India s partner in the biggest oilfield in Rajasthan state, is seeking to change a contract that makes it liable to pay royalty on all the crude oil produced from the area even though it owns a 30 percent stake. ONGC may make 140 billion rupees as royalty payments on Cairn India s behalf over the life of the field, according to the New Delhi-based company.

 

 We now only need approval from the Cabinet, which we expect to get before April 15, Agarwal said. There is a royalty issue between Cairn India and ONGC and that has to be dealt with separately.

 

Cairn Energy is committed to completing the deal by April 15, Chief Executive Officer Bill Gammell said in New Delhi on March 16.

 

India s oil ministry has almost withdrawn the requirement that royalties paid for the Rajasthan oilfield by ONGC be equitably shared, Press Trust of India reported March 2, citing unidentified officials with direct knowledge of the matter. U. K. Prime Minister David Cameron sought early approval of the deal, Minister Reddy said in February.

Courtesy: Bloom Berg

 


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