Anil Agrawal-led Vedanta Group has offered to acquire 20 per cent of the issued share capital of Cairn India for around Rs13,631 crore (about $3 billion) in an open offer.

The UK-listed Vedanta Resources is making the acquisition through its India mining arm Sesa Goa Ltd offer ahead of its proposed $9.5 billion acquisition of Cairn's oil and gas assets in India.

The offer will open on 11 October and close on 30 October, the Vedanta Group said in a public announcement.

Vedanta has agreed on a share price of Rs405 apiece, which includes Rs50 a share non-compete fees. Other shareholders of Cairn will be paid Rs355 per share, while Cairn Energy will be paid Rs405 a share.

If there is insufficient take up in the open offer, Sesa Goa will acquire the balance as part of the Vedanta Group's acquisition of a 51-60 per cent stake in Cairn India. The total
cash consideration for the shares to be acquired is $3billion, the company announced today.

Sesa Goa said the stake acquisition in a world-class asset with significant growth potential would give superior returns with added security.

The transaction will also immediately EPS accretive for Sesa Goa and will leave its 50 mtpa iron ore expansion programme unaffected, the company said in its release.

"The proposed strategic investment provides Sesa Goa an opportunity to earn superior returns in an investment which will benefit from value creation as part of the Vedanta Group whilst providing the protection of participating in a controlling interest," P K Mukherjee, managing director of Sesa Goa, said.

Cairn India owns 70 per cent stake in the Rajasthan oil development project while state-owned Oil and Natural Gas Corporation Ltd (ONGC) owns the remaining 30 per cent stake.

The development has been largely de-risked with the first phase of development now complete and a 600 km heated pipeline in place. Currently Cairn India is producing approximately 125,000 barrels of crude oil per day. The project represents a significant potential resource base with estimated oil in place in excess of 6.5 billion barrels, it said.

Cairn India is India's second-largest private sector upstream oil company (by reserves) and a world-class asset. Its key producing asset represents 25 per cent of India's total oil production. It is a low operating cost, long life asset with the ability to increase its production plateau, the release said.

Cairn India is listed on the Bombay Stock Exchange and the National Stock Exchange and had a market capitalisation in excess of $14 billion on the day prior to the announcement of the offer.

Cairn India has interests in 11 blocks in India and Sri Lanka. Cairn Energy holds a 62.4 per cent interest in Cairn India - a circa 70 per cent working interest in development areas totalling 3,111 sq km in the Rajasthan Block.

Besides, Cairn India has operating interests in producing fields at Ravva in Block PKGM-1 in the Krishna-Godavari Basin offshore eastern India (a 22.5 per cent working interest) and at Lakshmi and Gauri in Block CB/OS-2 in the Cambay Basin offshore western India (a 40 per cent working interest).

As of 31 December 2009, Cairn India had total assets worth around $3.07 billion. For the 12 months ended 31 December 2009 cairn India reported a profit before tax of $29.1 million.

Sesa Goa will fund the acquisition through the company's cash balances. The transaction is expected to close by year-end.