Vedanta to Buy Cairn India Stake in $9.6 Billion Deal

Vedanta Resources said Monday that it would buy from Cairn Energy a stake in its Indian subsidiary for up to $9.6 billion in cash, acquiring with the deal Cairn’s huge Rajasthan oil field with plans to bolster India’s domestic oil production.

Vedanta, headed by the mining billionaire Anil Agarwal and headquartered in London, said it would pay 405 rupees, or $8.66, per share of Cairn India, a premium of about 32 percent over recent share prices.

The company will buy between 21 and 40 percent of Cairn India, while collaborating with the Indian iron ore producer Sesa Goa to make a tender offer for another 20 percent of Cairn diluted shares.

Vedanta said it was financing the deal with debt and internal cash reserves, and intended to build up an “Indian natural resources champion” using the company that produces 125,000 barrels of crude per day from the Rajasthan field, and which sits on an estimated 6.5 billion barrels of oil and gas.

“Cairn India represents a unique oil and gas exploration and production platform with the second-largest reserves in India among private sector oil companies, a proven management team, and low-cost production,” Vedanta said.

India currently needs to import two-thirds of the oil it consumes to fuel its dramatic economic growth, with that share expected to increase in coming years — a trend Vedanta hopes to curb.

Cairn, which now owns 62.4 percent of its Indian arm, said in a separate statement Monday that much of the cash would go to its shareholders, with the rest financing exploration in Greenland, where it has a major presence. The company, based in Scotland, will keep a minority stake in Cairn India of between 10 percent and 21 percent.

Cairn India, listed on the Bombay Stock Exchange, is one of the largest oil and gas companies in the country.

The deal is expected to close by the first quarter of next year at the latest. It has been cleared with regulators but awaits shareholder approval at both companies.

Standard Chartered Bank led the financing and advising of Vedanta, with J.P. Morgan Cazenove and Morgan Stanley serving as joint lead advisers and sponsors, and Credit Suisse and Goldman Sachs acting for joint financing and advising.

NM Rothschild & Sons advised Cairn.