Cairn India, Vedanta sweeten merger deal for shareholders

The board of Cairn India and Vedanta Ltd today sweetened their merger deal by revising terms of the merger of both companies, seeking to woo Cairn India shareholders – especially financial institutions.

The shareholders of Cairn India will now get one share in Vedanta and minority shareholders will get an additional four Redeemable Preference Shares in Vedanta Ltd with a face value of Rs10 for every share held by them.

Cairn India's minority shareholders will get dividend at the rate of 7.5 per cent per annum with a tenor of 18 months which has implied premium of 20 per cent to one month of Cairn India share price, the company said. Post merger, Vedanta plc ownership in Vedanta Ltd is expected to decrease to 50.1 per cent from its current 62.9 per cent shareholding while Cairn India's minority shareholders will own 20.2 per cent and Vedanta Limited minority shareholders will own a 29.7 per cent stake in the enlarged entity.

In a statement, Vedanta said the transaction offers significant benefits for Cairn India shareholders as it de-risked earnings and stable cash flows supporting investment and dividends through the cycle, driving long term value.

The exposure to Vedanta Limited's world class metals and mining assets, delivering strong growth through production ramp ups will also help Cairn.

Besides, improved optionality to allocate capital and increased participation in cost savings is another positive from the deal. Increased free float and trading liquidity while will lead to potential re-rating of the merged company, Vedanta said.

When the merger was first announced June last year, financial institutions led by the LIC had objected to the deal saying a debt-heavy Vedanta is merging cash-rich Cairn India at a merger ratio (1:1 plus one preference share), which was not favourable to minority shareholders.