Vedanta Resources Secures $6 Billion Loan from Consortium for Cairn India Acquisition

Strategic Insights -

A consortium of eight leading banks has agreed to provide $6 billion in financing to Vedanta Resources Plc, paving the way for its acquisition of a significant stake in Cairn India Limited. The Anil Agarwal-led company plans to acquire 51-60% of Cairn India for $8.5-9.6 billion, with Vedanta directly holding 31-40% of the subsidiary. The transaction has, however, been contentious, with Oil and Natural Gas Corporation (ONGC) claiming pre-emption rights on Cairn India's assets. The Sesa Goa open offer, a key component of the deal, remains pending approval from the Securities and Exchange Board of India.

Key Takeaways:

  • Vedanta Resources has secured a $6 billion loan from a consortium of eight banks, including Barclays Capital, Citi, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley, Royal Bank of Scotland, and Standard Chartered, to fund its acquisition of Cairn India Limited.
  • The deal involves Vedanta acquiring 51-60% of Cairn India, with Vedanta directly holding 31-40% of the subsidiary.
  • Cairn Energy Plc, a UK-based oil and gas company, will sell its majority stake in Cairn India to Vedanta, while Sesa Goa, another Anil Agarwal firm, will make an open offer for a 20% stake in the company.
  • The transaction has been fraught with controversy, with Oil and Natural Gas Corporation (ONGC) claiming pre-emption rights on Cairn India's assets.
  • ONGC holds 30% in Cairn India's main oil asset in Rajasthan, and has stated that it will only consider the sale if Cairn Energy seeks permission for all its 10 properties in the country.
  • The Sesa Goa open offer is yet to receive the approval of the Securities and Exchange Board of India.
  • Mike Watts, deputy chief executive officer of Cairn Energy Plc, has expressed confidence in obtaining the necessary approvals, but has cautioned that the stake sale is not guaranteed.

Statistics:

  • $6 billion: The amount of financing agreed upon by the consortium of eight banks to fund Vedanta's acquisition of Cairn India.
  • $8.5-9.6 billion: The estimated value of Cairn India's stake sale.
  • 51-60%: The proposed stake acquisition by Vedanta Resources.
  • 31-40%: The proposed stake holding by Vedanta Resources directly in Cairn India.
  • 20%: The proposed open offer stake by Sesa Goa in Cairn India.

Sources:

  • ABP Private Limited (Copyright 2010)
  • Contify.com (distributed by)