Vedanta Resources, the FTSE 100 Indian resources company, is undertaking more work to simplify its structure, confirming plans to merge its Indian subsidiaries, Mumbai-listed Vedanta Limited and Cairn India.
Cairn India minority shareholders will receive one equity share in Vedanta Ltd, as well as one 7.5 per cent preference share with a face value of 10 rupees, for each share they hold, implying a 7.3 per cent premium to the previous closing price.
“This marks a significant step towards achieving our stated long term vision of a simplified group structure with alignment of interests between all shareholders for the creation of long term sustainable value,” said chairman Anil Agarwal, who has long wanted to cement Vedanta Resources as an Indian resources company that matches the global elite.
Chief executive Tom Albanese, the former boss of mining giant Rio Tinto, said the move will enable sustained strong dividends and the allocation of capital to “the highest return projects”, with the combined businesses to be “uniquely positioned” with regards to India’s energy and mineral resources. The deal, which is expected to complete in the first quarter of 2016, is “not inconsistent” with what Vedanta has done before, one banking source told City A.M., pointing to a restructuring in 2012 that served to simplify the group.
Vedanta Resources’ stake in Vedanta Ltd is expected to fall to 50.1 per cent from the 62.9 per cent held ahead of the deal. Cairn India’s minority shareholders will own a 20.2 per cent stake, while Vedanta Ltd minority shareholders will own a 29.7 per cent stake in the combined entity.
The deal requires the consent of shareholders in each of the three companies involved, as well approvals from a list of authorities including stock exchanges and Indian courts.
BEHIND THE DEAL: SPIRO YOUAKIM – LAZARD
1 Youakim, advising Vedanta, is a managing director of investment banking in Lazard’s London office. He joined the firm in 2008 from Citigroup.
2 He currently holds the position of global head of natural resources investment banking. He started his career at Credit Lyonnais.
3 Big deals Youakim has previously worked on include Mittal Steel’s merger with Arcelor. He was also part of a team advising Qatari shareholders on the 2012 merger between Glencore and Xstrata.
Lazard’s Nicola Pull also advised Vedanta. JP Morgan Cazenove is joint-broker to Vedanta, led by Barry Weir and Edward Jack. Morgan Stanley is also joint-broker, with Teodor Todorov and Tom Perry leading the team.