Billionaire Agarwal Combines Units Amid Resource Downturn

(Bloomberg) -- Billionaire Anil Agarwal’s Vedanta Ltd. will absorb unit Cairn India Ltd., combining India’s biggest producer of aluminum and copper with the operator of its largest onshore oil block.

The all-stock deal will offer each Cairn India shareholder one ordinary share, and a 7.5 percent-redeemable preference share of Vedanta Ltd. with a face value of 10 rupees, according to statements from both the companies on Sunday. The deal will give shareholders an implied premium of 7.3 percent over the last traded price of Cairn India stock.

The combined entity will help Agarwal, weighed down by $12 billion of group debt amid a downturn in crude oil and aluminum, reorganize the group’s assets and liabilities. It will also give him access to Cairn India’s $2.7 billion of cash.

Oil and gas will remain the key focus of Cairn India and Vedanta intends to protect the Cairn brand, Vedanta Resources Chief Executive Officer Tom Albanese said at a media briefing in Mumbai on Sunday after the merger announcement. The enlarged group will boost capital access, Cairn India CEO Mayank Ashar told reporters.

Vedanta Ltd. is at an advanced stage to refinance $2 billion of debt maturing in the middle of next year, Vedanta Resources Chief Financial Officer D.D. Jalan said at the briefing. Vedanta Ltd.’s debt cost may decline or remain at 7.5 percent, he said.

Post-merger, London-listed parent Vedanta Resources Plc’s holding in Mumbai-listed Vedanta Ltd. will drop to 50.1 percent from 62.9 percent. Vedanta Ltd. will also consider absorbing some overseas units to simplify the group structure, it said.

Shrinking Margins

Vedanta, the nation’s second-most indebted metals company, is facing shrinking profit margins after the premium paid for immediate delivery of aluminum plunged 70 percent from a November record. Crude’s 45 percent plunge in the past year led to Cairn India’s first quarterly loss in more than seven years. The company produces oil and gas from three of its seven blocks in India.


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Copyright 2016 Bloomberg News.


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