Deal update: Cairn extends deadline for completion of Vedanta stake sale

The British company extended the deadline at its level and did not take a fresh mandate from shareholders, an indication that its previous stance was only to pressure the government into taking a decision on the transaction expeditiously

New Delhi: A day after the government referred its $9.6 billion deal to a panel of ministers, UK's Cairn Energy Plc today said it has extended the deadline for completion of the sale of a majority stake in its Indian unit to Vedanta Resources by over a month to 20th May, reports PTI.

Cairn Energy's sale of a 40% to 51% stake in Cairn India and the subsequent open offer by Vedanta group for acquisition of an additional 20% interest were previously to be completed by 15th April.

The Edinburgh-based firm has since announcing the deal with Vedanta in August last year maintained that the 15th April deadline is sacrosanct and it will not go back to its shareholders for extension of the same.

But today, the company extended the deadline at its level and did not take a fresh mandate from shareholders, an indication that its previous stance was only to pressure the government into taking a decision on the transaction expeditiously.

The Cabinet Committee on Economic Affairs (CCEA) had yesterday referred the Cairn-Vedanta deal to a Group of Ministers (GoM) headed by finance minister Pranab Mukherjee as there were sharp differences over the conditions to be set for such nod.

The extension at the company level indicates that the deal provides for much more time than what Cairn and Vedanta have been harping upon and the GoM, which has to give its recommendation to the Cabinet for a decision, will not have to rush into things.

Cairn Energy in a statement said Vedanta has received market regulator Securities and Exchange Board of India's (SEBI) clearance to commence an open offer for up to 20% of Cairn India shares.

The open offer will be made by Vedanta's subsidiary Sesa Goa and will open for acceptances between 11th and 30th April.

"Cairn and Vedanta have extended the long stop date in the sale agreement, by which all conditions must be completed or waived (where permitted) to 20th May in order to accommodate the completion of the open offer," the statement said.

More importantly, Cairn said SEBI has made changes in its deal with Vedanta and has struck down the call and put option.

As per the August announcement, Cairn Energy was to sell a minimum of 40% out of its 62.25% stake in Cairn India to Vedanta. Vedanta then was to make an open offer for an additional 20% and any shortfall in the open offer was to have been made up by Cairn selling more shares with an upper ceiling of 51%.

But SEBI has now disallowed this, which in effect means Cairn Energy will only sell a 40% stake at Rs405 per share to garner $6.7 billion.

Cairn Energy said the company "looks forward to the successful completion of the transaction after obtaining all the necessary government of India approvals and consents."

"SEBI has also notified Vedanta that the put and call options exercisable by Cairn and Vedanta respectively and the pre-emption right exercisable by Vedanta in connection with the transaction must be removed from the sale agreement as they do not comply with certain Indian securities regulations.

As a result of this stipulation by SEBI and to allow the open offer to proceed, Cairn and Vedanta have agreed that the put and call options shall not be enforceable or exerciseable.

Vedanta has also agreed that its pre-emption right shall not be enforceable or exerciseable," the statement said.

After the transaction, Cairn Energy is expected to have a residual interest of between 10.6% and 21.6% of the fully-diluted share capital of Cairn India.

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