India-focused miner Vedanta Resources has acquired a 10.4 per cent stake worth $1.5bn (£921m) in Cairn India, its takeover target that remains subject to approval from the Indian government.
Vedanta bought the 200m-share stake from Petronas, the Malaysian state oil company for 331 rupees (£4.52) a share, reflecting a 1.6 per cent discount to Cairn India's closing price on Monday.
Its $9.6bn proposed deal to acquire Cairn, the Indian oil and gas assets of the UK’s Cairn Energy is designed to give Vedanta a slice of India's oil reserves and exposure to the surging demand for energy.
Vedanta, through Indian subsidiary Sese Goa, has made an open offer to Cairn India’s minority investors to acquire up to a 20 per cent stake in Cairn India. The offer launched on April 11 and closes on April 30.
Vedanta and Cairn Energy have extended the deadline to seal the deal to May 20 after they failed to get the approval from the Indian government within the previous deadline of April 15.
Petronas sold its entire 14.9 per cent stake in Cairn India. The remaining 4.5 per cent was sold to foreign portfolio investors, sources told Reuters – but the additional ten per cent boost to Vedanta’s stake in Cairn India will boost Vedanta’s takeover case and make it easier to finalise the deal.
The deal has been delayed by a dispute over royalty payments by Cairn India's partner, state-run Oil and Natural Gas.
ONGC, which has a 30 per cent holding in the Cairn-operated Rajasthan fields in western India, pays 100 per cent of the royalties. India's oil ministry has been pushing to share the royalty burden between ONGC and Cairn India.
Both Cairn and Vedanta have opposed that move. Any changes in the royalty structure will impact valuations and may jeopardise the deal, analysts have said.