Cairn India shareholders clear merger with Vedanta

The merger will give Vedanta access to Cairn India’s $3.5 billion cash pile and potentially help it repay debt and reduce interest costs


Cairn India’s minority shareholders will own 20.2% in the merged entity and Vedanta’s minority shareholders will hold 29.7%.
Cairn India’s minority shareholders will own 20.2% in the merged entity and Vedanta’s minority shareholders will hold 29.7%.

Mumbai: Cairn India Ltd’s minority shareholders have approved the merger of the company with Vedanta Ltd, accepting the latter’s sweetened share-swap offer.

About 92.86% of votes polled were in favour of the merger, said a Cairn statement. About 12.63% of shareholders belonging to the public institution category (of which Life Insurance Corporation of India, or LIC, is a part) didn’t vote. Cairn India shareholders met on Monday.

The merger will give Vedanta access to Cairn India’s $3.5 billion cash pile and potentially help it repay debt and reduce interest costs.

“Though some FIIs (foreign institutional investors) have voted against the merger, it appears Cairn Energy Plc. has voted in favour of the merger while LIC may have abstained,” said J.N. Gupta, co-founder and managing director at Stakeholders Empowerment Services, the proxy advisory firm that had advised against the merger on transparency issues.

Another proxy advisory firm Institutional Investor Advisory Services had suggested investors support the merger, arguing that it will create a large, diversified natural resources company with reduced earnings volatility and enable better capital allocation.

The transaction is expected to be completed by the end of this financial year after the firms get other legal and regulatory approvals, the Cairn India statement said. Equity shareholders and creditors of Vedanta approved the merger last week.

LIC holds 9.6% in Cairn India and 3.9% in Vedanta. Cairn UK Holdings Ltd, whose parent Cairn Energy Plc. sold a controlling stake in its Indian unit to Vedanta Resources Plc. in 2011, owns a 9.82% stake.

On 22 July, Vedanta offered Cairn India shareholders one equity share and four redeemable preference shares in the metals and mining company, sweetening the terms after minority shareholders such as LIC opposed the earlier offer of one equity share and one redeemable preference share, made on 14 June 2015.

Mint reported on 9 September that LIC will vote in favour of the proposed merger The revised merger terms will earn considerably more for Cairn India shareholders compared with the old offer.

Ahead of the merger approval announcement, Cairn India shares dropped 5.22% to close at Rs188.95 on BSE. Vedanta, too, shed 5.88% to close at Rs161.55 in a weak market. The BSE’s benchmark Sensex fell 1.54% to 28,353.54.

Cairn India’s minority shareholders will own 20.2% in the merged entity and Vedanta’s minority shareholders will hold 29.7%.

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