Scottish oil explorer Cairn Energy saw a chunk of its Indian subsidiary change hands yesterday, when diversified mining company Vedanta Resources revealed it had acquired 10.4% of the business.
The deal was a welcome development for Cairn Energy, whose efforts to sell a controlling interest in Cairn India to Vedanta have become bogged down in regulatory delays.
Edinburgh-based Cairn is shifting its exploration focus to Greenland, while Vedanta’s move to acquire Cairn India is part of London-based mining magnate Anil Agarwal’s plans to grab a slice of India’s oil reserves and get exposure to surging demand.
Vedanta’s agreement to buy a stake of 40-51% in Cairn India has yet to be cleared by the Indian government.
UK-listed Vedanta said yesterday it expected to own between 51% and 70.4% once the deal and an open offer to Cairn India minority shareholders were complete.
Vedanta’s newly acquired 10.4% stake – 200million shares – was sold by Malaysian national oil corporation Petronas for 457p a share, below the price being offered to minority shareholders in the open offer by Vedanta unit Sesa Goa and reflecting a 1.6% discount to Cairn India’s closing price on Monday.
Petronas is thought to have sold the remainder of its stake, about 4%, to foreign portfolio investors.
Vedanta said it was offered only the shares it eventually bought.
Analysts said Vedanta’s stake purchase showed it was serious about the bigger deal and would be useful if the firm failed to get a big response from minority shareholders for its open offer.
Jagannadham Thunuguntla, head of research at brokerage SMC Global Securities, said: “Vedanta will now be able to get a comfortable controlling stake in Cairn India even if the open offer response is very poor.
“But all this is subjective to the government clearing the deal, and that is an unknown factor.”
Vedanta’s deal to buy Cairn’s India assets, which would be the biggest acquisition in the Indian oil sector, is widely seen as a litmus test for foreign investment into the country. The companies extended the deadline for sealing the deal to May 20 after they failed to get the approval from the Indian government within the previous deadline of April 15.