Cairn revises Vedanta terms in effort to win approval

Cairn Energy, the oil and gas company, has restructured its proposed $9.6bn (£6bn) sale of assets in India to Vedanta Resources in a bid to overcome regulatory delay in New Delhi.

Under revised terms announced on Monday night, Vedanta will seek to take control of the oilfields in Rajasthan by splitting its transaction with Cairn into two parts. It also said it planned to buy a proposed 40 per cent stake in Cairn’s Indian subsidiary at a reduced amount of $6.02bn.

The creative strategy gives momentum to one of the largest corporate take-overs in India’s history, first proposed almost a year ago, in the absence of regulatory clarity. Both sides are exasperated by New Delhi’s indecision, which some interpret as political opposition to the deal between two UK-listed entities.

Vedanta will buy a 10 per cent stake in Cairn’s subsidiary from its parent by July 11 to lift its existing stake to 28.5 per cent.

The resources group will then hope to acquire another 30 per cent from Cairn once it has regulatory consent for the takeover from the Indian government.

Anil Agarwal, chairman of Vedanta, has so far failed to persuade the Indian government to detach his company’s bid for Cairn’s oil assets in India from a deadlock over payment of royalties by Cairn’s state-owned partner Oil & Natural Gas Corporation. As a result, permission for his takeover lies in limbo and, if agreed, is likely to carry conditions more favourable to ONGC.

The proposed deal is viewed as an important test of whether foreign investors can make lucrative exits from Indian ventures at a time of their choosing. People close to the deal said on Monday that Mr Agarwal was determined to proceed with the transaction regardless of New Delhi’s indecision.

A decision had been expected by the Indian cabinet last week.

On Monday night, the two companies said they had agreed to remove the non-compete provision and a related fee of 50 rupees per share, cutting the price for the total 40 per cent stake from $6.65bn to $6.02bn.

Some of Cairn’s shareholders have expressed concern about the lengthy delay the transaction has suffered.

Sir Bill Gammell, Cairn’s chief executive, has maintained that the transaction will go through in spite of missing shareholder deadlines for approval and after a top level engagement by prime minister David Cameron on Cairn’s behalf.

“Cairn is pleased to have secured this adjustment to the agreement with Vedanta,” Sir Bill said on Monday night. “Cairn continues to believe the necessary approvals to complete the Vedanta transaction will be received.”

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