New Delhi: London-listed Vedanta Resources is in talks to acquire a majority stake in Cairn India for up to $8.5 billion and a deal may be announced in a couple of days, a report said.
Scottish explorer Cairn Energy Plc, which holds a 62.4% interest in its India-listed unit Cairn India, is seeking up to a 20% price premium for passing on a 51% controlling stake, the Press Trust of India (PTI) said, quoting two people it said had knowledge of the talks.
Cairn India has expanded from a small oil firm in the 1990s into India’s fourth-largest oil and gas company, thanks to a massive energy find in the western Indian desert state of Rajasthan.
Billionaire tycoon Anil Agarwal, who heads Vedanta, “is meeting Cairn Energy Plc chief executive Bill Gammell in London today (Friday) and the deal is likely to be announced as early as Sunday evening or on Monday”, PTI quoted one of its two sources as saying.
The two companies confirmed in separate but identical statements on Thursday that they were in discussions about the possible sale of Cairn Energy’s stake in its Indian unit to Vedanta.
Cairn India, valued at over $14 billion at current share prices, has three assets producing oil and gas, including the Rajasthan fields, and seven exploration blocks.
PTI’s sources said Cairn Energy has been in talks with India-focused Vedanta for three weeks on selling a majority stake.
The purchase would mark a shift in Vedanta’s strategy of only focusing on core metals, mining and power generation.
Upon acquisition of a majority stake, Vedanta Resources would have to make an open offer for an additional 20% stake under Indian stock exchange rules.
Cairn India chief executive Rahul Dhir on Friday briefed India’s oil secretary S. Sundareshan, who said the deal would need government approval.
“To me it looks like they (Cairn Energy) are not exiting completely,” Dhir told reporters. “The discussions are taking place between the majority shareholder and Vedanta. I am not part of those discussions,” he added.
If the talks are successful, Vedanta - which has iron ore, zinc and copper mines - would be the second-largest miner in the world after Australia’s BHP Billiton to have an interest in oil.
“If a new strategic shareholder is coming, it is only underscoring the belief and the faith they have in the business,” Dhir said.
Dhir said Vedanta was the only company Cairn Energy was presently talking to.
Cairn India owns a 70% stake in the Mangala oil field in the prolific Rajasthan block where the rest is held by state-owned Oil and Natural Gas Corp.
Cairn India estimates the Mangala field can produce up up to 150,000 barrels per day. The entire Rajasthan block is estimated to have a potential of up to 240,000 barrels per day.