Vedanta proposes to pick up 60 per cent in Cairn India

With its proposed move to buy a controlling stake of between 51-60 per cent in oil production firm Cairn India for $8.5-9.6 billion, the Vedanta Group hopes to take a step towards owning a diversified portfolio of natural resources assets in India.

The group, which is headed by metals and mining baron Anil Agarwal has made an offer that values Cairn India at around $17 billion.

Cairn Plc will sell a maximum of 51 per cent in Cairn India to Vedanta for up to $8.4 billion, with the mandatory 20 per cent open offer to be made by the Vedanta group's iron ore producer Sesa Goa.

With a price of Rs405 apiece, at which the deal was concluded, inclusive of a non-compete fee of Rs50 a share, the open offer to minority shareholders would be made at Rs355 per share, unless the Indian capital market regulator decides otherwise.

If Sesa Goa is not able to pick up 20 per cent through the open offer, it would acquire the remaining amount from Vedanta at Rs405 per share, to ensure that Vedanta does acquire a controlling interest in Cairn India, with call options available. The call options would be able to be exercised at Rs405 per share after July 2012 and July 2013.

Meanwhile, the government has said it would await state-owned Oil and Natural Gas Corporation's views before it takes a decision to approve the deal. ONGC holds a 30-per cent equity in Cairn India's most productive Barmer block in Rajasthan.

The transaction would need to be approved by RBI and the Securities and Exchange Board of India (SEBI) though it would not require any government clearances, since the production sharing contract (PSC) would remain the same.