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22 July 2016
VEDANTA LIMITED AND CAIRN INDIA
REVISE TERMS FOR MERGER
Vedanta Limited, Cairn India Limited ("Cairn India") and Vedanta Resources plc ("Vedanta plc" together with its subsidiaries, the "Group"), today announce revised and final terms to the recommended merger between Vedanta Limited and Cairn India (the "Transaction"), that was announced on 14 June 2015.
Key Highlights
o The Boards of Vedanta Limited and Cairn India have today approved revised and final terms for the Transaction, taking into account prevailing market conditions and having regard to underlying commercial factors.
o Pursuant to the revised and final terms, each Cairn India minority shareholder will receive for each equity share held:
- 1 equity share in Vedanta Limited; and
- 4 Redeemable Preference Shares with a face value of INR 10 in Vedanta Limited, with a coupon of 7.5% and tenure of 18 months from issuance.
- Implied premium of 20% to one month VWAP of Cairn India share price.
o The recent commodity price environment has further strengthened the strategic rationale of the Transaction outlined at the announcement:
- Diversified Tier-I portfolio de-risks earnings volatility and drives stable cash flows through the cycle.
- Strong historical evidence over the last 10 years, of diversified resources companies generating total shareholder returns superior to single-commodity companies.
- Improved ability to allocate capital to the highest return projects across the portfolio.
- Greater financial flexibility to sustain strong dividend distribution.
- Cost savings and greater capital efficiency, with potential re-rating to benefit all shareholders.
- Stronger balance sheet will allow for the Group's overall cost of capital to be reduced.
- Consistent with stated corporate strategy to simplify the Group structure.
- Offers significant long term sustainable value enhancement for all shareholders.
o The Transaction offers significant benefits for Cairn India shareholders
- De-risked earnings and stable cash flows supporting investment and dividends through the cycle, driving long term value.
- Attractive transaction terms.
- Exposure to Vedanta Limited's world class metals and mining assets - low cost, long life and well invested, delivering strong growth through production ramp ups.
- Improved optionality to allocate capital and increased participation in cost savings.
- Increased free float and trading liquidity.
- Potential re-rating of the merged company.
o The Jurisdictional High Courts have convened the shareholder meetings for each of Vedanta Limited and Cairn India on 8 September 2016 and 12 September 2016, respectively.
- The Notice convening the shareholder meetings will be sent to shareholders in due course.
o As previously announced, following completion of the Transaction:
- Vedanta plc ownership in Vedanta Limited is expected to decrease to 50.1% from its current 62.9% shareholding.
- Cairn India minority shareholders will own 20.2% and Vedanta Limited minority shareholders will own a 29.7% stake in the enlarged entity.
Anil Agarwal, Chairman of Vedanta Resources plc, said: "I am pleased that the Boards of Cairn India and Vedanta Limited have approved the terms announced today. The simplified corporate structure will better align interests between all shareholders for the creation of long term sustainable value."
Sudhir Mathur, CFO and Acting CEO of Cairn India, said: "Cairn India shareholders will benefit from exposure to a diversified portfolio of world-class, low cost, long-life assets with significant growth. We are confident that the financial strength and diversified portfolio of Tier-I assets will provide de-risked earnings and stable cash flows, driving long-term value. Cairn India shareholders will benefit from the revised terms announced today, while retaining the upside from Cairn's strong oil & gas assets."
Tom Albanese, CEO of Vedanta Limited, said: "The strategic rationale for merging Vedanta Limited and Cairn India remains highly compelling. Diversified resources companies have delivered superior returns for shareholders historically. The Transaction consolidates our portfolio of attractive Tier-I assets and simplifies the group structure, better positioning the group to deliver superior value to all shareholders over the longer term."
Recommendations, Financial Advisers and Fairness Opinions
The non-conflicted, independent members of the Boards of Directors of Vedanta Limited, Cairn India and Vedanta plc unanimously approved the revised merger terms.
Independent valuers, Price Waterhouse & Co LLP and Walker Chandiok & Co LLP, have provided their joint recommendation on the exchange ratio for consideration by the Boards of Vedanta Limited and Cairn India.
Lazard & Co., Limited has acted as financial advisor to Vedanta Limited in relation to the Transaction and the Board of Directors of Vedanta Limited has received a fairness opinion from Lazard India Private Limited with regard to the fairness of the exchange ratio to Vedanta Limited, from a financial point of view.
The Board of Directors of Cairn India has received opinions from DSP Merrill Lynch Limited and JM Financial Institutional Securities Limited as to the fairness of the exchange ratio to Cairn India, from a financial point of view.
J.P. Morgan Cazenove and Morgan Stanley are acting as joint financial advisors and joint corporate brokers to Vedanta plc in relation to the Transaction.
Key Transaction Approvals
Completion of the Transaction will be conditional on receipt of the following approvals:
o Vedanta Limited and Cairn India shareholder approvals through postal ballot including e-voting :
- Majority of the minority shareholders voting required to vote in favour of the Transaction.
o At a High Court directed meeting (scheduled for 8 September 2016 for Vedanta Limited and 12 September 2016 for Cairn India):
- Majority in number and 75% in value of shareholders present and voting at the shareholder meeting, required to vote in favour of the Transaction;
- Vedanta plc and Vedanta Limited can vote at the meetings for Vedanta Limited and Cairn India, respectively.
- Additionally, for Vedanta Limited, majority in number and 75% in value of creditors present and voting at the secured and unsecured creditor meeting (held separately), required to vote in favour of the Transaction;
o Vedanta plc shareholder approval:
- Simple majority of holders present and voting at the shareholder meeting planned for September 2016 required to vote in favour of the Transaction.
o Ministry of Petroleum & Natural Gas - vesting of Cairn PSC's to Vedanta Limited.
o Jurisdictional High Courts where the registered offices of Vedanta Limited and Cairn India are situated.
o Foreign Investment Promotion Board - issue of redeemable preference shares to non-resident Cairn India shareholders.
o Regulatory and other approvals as may be required.
The appointed date for the scheme has been revised to 1 April 2016 from 1 April 2015 earlier. The Transaction is expected to close in Q1 CY2017.
Conference Calls for Analysts and Shareholders
There will be a conference call at 6.45 PM IST today:
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TIME Dial In (Toll) |
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India & International (Main Access) |
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+91 22 3938 1017 |
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India & International (Standby Access) |
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+91 22 6746 8333 |
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TIME Dial In (Toll Free) |
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UK only |
2.15 PM |
0 808 101 1573 |
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USA only |
9.15 AM |
1 866 746 2133 |
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Hong Kong |
9.15 PM |
800 964 448 |
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Singapore |
9.15 PM |
800 101 2045 |
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Replay (available until 29 juLY 2016) |
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Mumbai |
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+91 22 3065 2322 |
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+91 22 6181 3322 |
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Contacts
Vedanta Limited is listed on the Bombay Stock Exchange and the National Stock Exchange in India and has ADRs listed on the New York Stock Exchange. For more information, please log on to www.vedantalimited.com. Vedanta Limited had gross assets of $28.3 billion as of 31 March 2016 and profit before tax (before exceptional items) of $1.0 billion for the year ending 31 March 2016.
Cairn India is one of the largest independent oil & gas exploration and production companies in India. It operates 27% of India's domestic crude oil production and to date has opened 4 frontier basins with numerous discoveries. Cairn India has a portfolio of 9 blocks - one block in Rajasthan, which contains multiple assets, two on the west coast and four on the east coast of India and one each in Sri Lanka and South Africa. Oil and gas is currently being produced from Rajasthan, Ravva and Cambay. It is listed on the BSE and NSE in India. For more information, please visit www.cairnindia.com. Cairn India had gross assets of $8.5 billion as of 31 March 2016 and profit before tax (before exceptional items) of $342 million for the year ending 31 March 2016.
Investors should seek their own tax advice.
J.P. Morgan Limited, which conducts its UK investment banking activities as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as corporate broker and financial advisor exclusively for Vedanta plc and no one else in connection with the Transaction and matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement nor be responsible to anyone other than Vedanta plc for providing the protections afforded to its clients nor for providing advice in connection with the Transaction or any matter referred to herein. Neither J.P. Morgan Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of J.P. Morgan Limited in connection with this announcement, any statement contained herein or otherwise.
Morgan Stanley & Co. International plc ("Morgan Stanley") is acting as corporate broker and financial advisor to Vedanta plc and is advising no one else in connection with the Transaction and this announcement. In connection with such matters, Morgan Stanley, its affiliates and its and their respective directors, officers, employees and agents, will not regard any other person as their client, nor will they owe or accept any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person other than Vedanta plc for providing the protections afforded to their clients or for providing advice in connection with this announcement, any matters referred to herein or otherwise.
Lazard & Co., Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, and Lazard India Private limited, a Category I Merchant Banker registered with the Securities and Exchange Board of India (together with Lazard & Co., Limited, "Lazard"), are acting as financial advisor to Vedanta Limited and are advising no one else in connection with the Transaction referred to in this announcement and will not be responsible to any person other than Vedanta Limited for providing the protections afforded to the clients of Lazard, nor for providing advice in relation to the Transaction, the contents of this announcement or any other matters referred to herein. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this announcement, any statement contained herein or otherwise.
DSP Merrill Lynch Limited ("BofA Merrill Lynch") is acting as a financial advisor to Cairn India Limited and is advising no one else in connection with the Transaction and this announcement. In connection with such matters, BofA Merrill Lynch, its affiliates and its and their respective directors, officers, employees and agents, will not regard any other person as their client, nor will they owe or accept any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person other than Cairn India Limited for providing the protections afforded to their clients or for providing advice in connection with this announcement, the Transaction, any matters referred to herein or otherwise.
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