Cairn to Return Cash to Shareholders
Cairn Energy PLC announced the proposed return of approximately £481 million of the proceeds from the flotation of its Indian business, Cairn India, to Shareholders.
--Shareholders to receive £3.00 for each Existing Ordinary Share held --Return to be implemented by way of a B share scheme with a view to providing UK tax resident shareholders with flexibility to elect to receive cash in the form of income or capital or a combination of both --One B share for every one Existing Ordinary Share held --13 for 16 share consolidation to seek to maintain comparability of share price and earnings per share --EGM to approve the return on 22 March 2007
Sir Bill Gammell, Chief Executive of Cairn Energy PLC, commented:
"Following the successful flotation of Cairn India the return of cash to shareholders has been a key priority and I am delighted to be announcing this earlier than was previously anticipated.
"Shareholders will receive £3.00 per share and the remainder of the proceeds will currently be retained by the business with the aim of creating and realizing further value for shareholders in the future."
On 9 January 2007, the Group's Indian business was floated on the Bombay Stock Exchange and National Stock Exchange of India, pursuant to Cairn's strategy of increasing the autonomy of that business and of realizing value for Shareholders.
The Company now proposes to return to Shareholders approximately £481 million of the cash realized from that flotation, representing a return of £3.00 for each Existing Ordinary Share held by Shareholders on 23 March 2007. The remainder of the proceeds will currently be retained to fund the Group's business, thereby providing financial flexibility to support the growth of Capricorn, with the aim of creating and realizing further value for Shareholders in the future.
This return of cash is proposed to be made in a manner that should provide certain Shareholders with an element of choice as to when and in what form they receive the cash.
Return of Cash
The Return of Cash is proposed to be made by means of a B Share structure, in terms of which each Shareholder will receive:
For each Existing Ordinary Share held on 23 March 2007 - 1 B Share
For every 16 Existing Ordinary Shares held on 23 March 2007 - 13 New Ordinary Shares
The B Shares will not be listed on the Official List or admitted to trading on the London Stock Exchange. The New Ordinary Shares will be listed on the London Stock Exchange and will replace the Existing Ordinary Shares.
The choices which will be available to holders of B Shares in respect of the Return of Cash, if approved by Shareholders at the EGM, is summarized below.
The B Share Choices
Under the Return of Cash, Shareholders will have the following three choices in relation to the B Shares held by them on the B Share Record Date, although certain Shareholders resident outside of the United Kingdom will only be entitled to receive the Single B Share Dividend (being Choice 1 below).
Shareholders resident in the United Kingdom should read the Circular carefully as it explains the United Kingdom tax consequences of the three choices under current law. Any Shareholder who is in any doubt as to his tax position, or who is resident for tax purposes in a jurisdiction other than the United Kingdom, should consult an appropriate professional adviser without delay.
Save as noted above, Shareholders may elect to receive any one of, or a combination of, the B Share Choices.
Choice 1: Single B Share Dividend
- Shareholders can elect in respect of all or some of their B Shares, to receive a single dividend of £3.00 per B Share. The dividend will become payable on 4 April 2007, following which those B Shares, which have been so elected, will be automatically converted into Deferred Shares with a negligible value.
- The Single B Share Dividend will be taxed as income, as more fully described in the Circular.
Choice 2: Initial Purchase Offer
- Shareholders can elect in respect of all or some of their B Shares, to have those B Shares purchased by Hoare Govett on 4 April 2007 at £3.00 per B Share, free of all dealing expenses and commissions. Details of the terms of the offer to be made by Hoare Govett are set out in paragraphs 4 to 7 of Part III of the Circular. In particular, Shareholders should note that Hoare Govett may decide not to make the offer if certain force majeure events were to occur.
- It is expected that the proceeds from this purchase should be treated as capital for United Kingdom tax purposes on the basis of current practice.
Choice 3: Future Purchase Offer
- Shareholders, who elect for this choice in respect of all or some of their B Shares, will retain those B Shares for the time being. It is likely that Shareholders will be given the opportunity to sell further B Shares to Hoare Govett on 10 April 2007 at £3.00 per B Share, free of all dealing expenses and commissions. If this is the case (and assuming there has been no change in current practice) the proceeds from this Future Purchase Offer should also be treated as capital for United Kingdom tax purposes.
Share Capital Consolidation
The aggregate amount proposed to be returned to Shareholders pursuant to the Return of Cash is equivalent to approximately 18.75 percent. of the market capitalization of the Company at the close of business on 23 February 2007 (being the latest practicable date before the publication of the Circular).
The effect of the Share Capital Consolidation is that the Existing Ordinary Shares will be replaced by the New Ordinary Shares so as to reduce the number of shares in issue to reflect the amount of cash to be returned to Shareholders. The aim of this is to seek to make the market price of a Cairn share comparable before and after the Return of Cash, subject to normal market movements following the date of the Circular.
The ratio used for the Share Capital Consolidation has been set by reference to the closing middle-market price of £16.00 per Existing Ordinary Share on 23 February 2007. On that basis, the Share Capital Consolidation will result in each Existing Ordinary Share being subdivided and consolidated into 0.8125 of a New Ordinary Share. Fractional entitlements arising from the Share Capital Consolidation will be aggregated and sold in the market on behalf of the relevant Shareholders. The proceeds of sale are expected to be sent to Shareholders on 11 April 2007 (or, if less than £3.00 in the case of any one Shareholder, donated to charities chosen by the Board). The value of any one Shareholder's fractional entitlement will not exceed the value of one New Ordinary Share.
As all ordinary shareholdings in the Company will be consolidated, the number of shares held by each Shareholder will reduce but Shareholders' percentage holdings in the issued ordinary share capital of the Company will (save in respect of fractional entitlements) remain unchanged immediately following the Share Capital Consolidation.
Similarly, although the nominal value of each Ordinary Share will change from 10 pence to 6 2/13 pence, the New Ordinary Shares will be equivalent in all material respects to the Existing Ordinary Shares, including their dividend, voting and other rights and will be admitted to trading in the same way as the Existing Ordinary Shares.
Following the Share Capital Consolidation, the Company's authorized equity share capital will comprise 365,625,000 New Ordinary Shares and, assuming no further shares are issued between 23 February 2007 and the date on which the Share Capital Consolidation becomes effective; its issued equity share capital will comprise 130,249,576 New Ordinary Shares.
The Circular to shareholders in connection with the Return of Cash will be posted to Shareholders Tuesday. The EGM seeking Shareholder approval for these proposals will be held at 2:15 p.m. on 22 March 2007.
The Circular will shortly be available to the public for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:
Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS Tel No. +44 (0)20 7066 1000, during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted).
The Circular will also shortly be available on the Investor Relations section of
Cairn's website at www.cairn-energy.plc.uk.
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