Shares of Vedanta and Cairn India rose 2.15% to 2.24% at 9:17 IST on BSE after Vedanta, Cairn India and Vedanta Resources plc together with its subsidiaries on 14 June 2015, announced a merger between Vedanta and Cairn India.
The announcement was made yesterday, 14 June 2015.
Vedanta (up 2.15% at Rs 187.95) and Cairn India (up 2.24% at Rs 184.80) edged higher.
Meanwhile, the S&P BSE Sensex was down 66.14 points or 0.25% at 26,359.16.
Vedanta, Cairn India and Vedanta Resources plc (Vedanta plc) together with its subsidiaries on 14 June 2015, announced a merger between Vedanta and Cairn India. As per the scheme, minority shareholders of Cairn India will receive for each equity shares held, one equity share in Vedanta of face value of Rs 1 each and one 7.5% redeemable preference share (RPS) in Vedanta with a face value of Rs 10. No shares will be issued to Vedanta or any of its subsidiaries for their shareholding in Cairn India. Approximately 75.20 crore of each of equity shares and RPS will be issued to the minority shareholders of Cairn India by Vedanta pursuant to the merger. Post completion of the transaction, Vedanta plc ownership in Vedanta is expected to decrease to 50.1% from its current 62.9% shareholding. Cairn India minority shareholders will own 20.2% and Vedanta minority shareholders will own a 29.7% stake in the enlarged entity. The transaction is expected to be tax-neutral for Vedanta, Cairn India and their shareholders under Indian law. Vedanta would further consider consolidation of some of its wholly owned foreign subsidiaries. Vedanta will continue to be listed on the BSE and NSE, with American Depository Shares (ADS) listed on the New York Stock Exchange (NYSE), and Vedanta plc will continue to be premium listed on the London Stock Exchange (LSE). Cairn India's BSE and NSE listings will be cancelled following completion of the transaction.
This merger accounting would be done under pooling of interest method. As part of this accounting treatment, goodwill appearing in the books of Vedanta and Cairn India would be adjusted against reserves including securities premium account. This will have no impact on cash or the profit and loss account. The transaction is expected to close in the first quarter of calendar year (CY) 2016.
Mr Anil Agarwal, Chairman of Vedanta plc said that the merger of Cairn India and Vedanta consolidates Vedanta plc's position as India's leading diversified natural resources champion, uniquely positioned to support India's economic growth. The independent directors, at both Vedanta and Cairn India, unanimously recommend the proposed combination. This marks a significant step towards achieving vedanta plc's stated long term vision of a simplified group structure with alignment of interests between all shareholders for the creation of long term sustainable value, Agarwal said.
Mr Tom Albanese, CEO of Vedanta said that this transaction consolidates Vedanta's portfolio of Tier-I assets which, combined with strong management, will deliver superior returns for all shareholders. It will result in improved financial flexibility to allocate capital to the highest return projects and sustain strong dividends, Albanese said. The combined entity is uniquely positioned to help unlock India's wealth of world-class energy and mineral resources, Albanese added.
Mr Mayank Ashar, CEO of Cairn India said that the merger with Vedanta will generate additional value for Cairn India's shareholders and de-risks Cairn India by providing access to a portfolio of diversified Tier-I, low cost, long-life assets, to deliver significant near term growth. The company's Rajasthan fields continue to remain its core asset, Mayank said. The financial strength of the enlarged group will ensure greater access to capital to further Indian oil & gas development, Mayank added.
On consolidated basis, Cairn India reported net loss of Rs 240.82 crore in Q4 March 2015 compared with net profit of Rs 3035.44 crore in Q4 March 2014. Net sales declined 47% to Rs 2677.20 crore in Q4 March 2015 over Q4 March 2014.
Cairn India is one of the largest independent oil & gas exploration and production companies in India.
On consolidated basis, Vedanta reported net loss of Rs 19228.12 crore in Q4 March 2015 compared with net profit of Rs 1621.55 crore in Q4 March 2014. Net sales declined 14.7% to Rs 17732.25 crore in Q4 March 2015 over Q4 March 2014.
Vedanta is a diversified natural resources company, whose business primarily involves exploring and processing minerals and oil & gas.
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