Vedanta Resources and Cairn Energy today extended the deadline for their $9.6-billion deal by more than a month. The earlier deadline was April 15.
In August last year, Cairn Energy agreed to sell a majority stake in Cairn India to Vedanta. The deal has been delayed due to a dispute over royalty payments by Cairn India’s partner, Oil and Natural Gas Corp.
The government yesterday referred the deal to a group of ministers.
Vedanta has already got the Securities and Exchange Board of India’s (Sebi’s) clearance to launch an open offer for up to 20 per cent of Cairn India shares. The offer will be made by Vedanta’s subsidiary, Sesa Goa, and will be open between April 11 and 30.
Meanwhile, with Sebi asking Vedanta to change the deal structure as a condition for clearing the open offer, Cairn Energy would be free to sell the residual stake of close to 10 per cent in Cairn India from 2012 onwards at the market price.
The initial share purchase agreement gave Vedanta the first right of refusal over this stake and fixed the price at Rs 405 a share. Sebi rejected this, saying it amounted to forward trading.
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In its statement to the Bombay Stock Exchange today, Cairn Energy said, “Cairn and Vedanta have agreed that the put and call options shall not be enforceable or exercisable. Vedanta has also agreed that its pre-emption right shall not be enforceable or exercisable.”
Under the earlier arrangement, Cairn was to sell a minimum of 40 per cent of its 62.25 per cent stake in Cairn India to Vedanta. It was to sell more shares in case Vedanta’s stake fell short of the 51 per cent mark after the open offer. The 10 per cent stake was over and above this transaction.
After the deal, Cairn Energy is expected to own 10.6-21.6 per cent of the fully-diluted share capital of Cairn India.
In a statement to the Bombay Stock Exchange, the company said, “Cairn and Vedanta have extended the long stop date in the sale agreement, by which all conditions must be completed or waived (where permitted) to May 20 to accommodate the completion of the open offer.”