Special Situations, Content Strategist, Smartkarma

Crispin Francis

Special Situations, Content Strategist

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

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On the 9th of June 2015, there was Media Speculation on the potential merger of Vedanta Limited ("VEDL") and Cairn India Limited ("CAIR").&nbsp;VEDL, CAIR's promoter with a majority stake, made an <a href="http://www.bseindia.com/xml-data/corpfiling/AttachHis/771592E4_ACEF_4F9E_A880_A62A1EEF478F_135856.pdf" target="_blank">announcement</a>&nbsp;with regards to the media speculation, stating that their strategy is to simplify and consolidate its corporate structure.&nbsp;On 14 June 2015, VEDL and CAIR&nbsp;<a href="http://www.bseindia.com/xml-data/corpfiling/AttachLive/3C03EBD1_6CBA_4E94_A2DA_F5000CEDE512_065424.pdf" target="_blank">announced</a>&nbsp;that they would be merging via a share swap scheme of amalgamation under the India Takeover Law.&nbsp;Deal value ~ USD 2.4 BnMinority shareholders of CAIR will receive for each equity share held:<ul><li>1 equity share in VEDL</li><li>1 redeemable preference share in VEDL with face value INR 10</li></ul>Key ingredient needed for the deal is the approval by CAIR shareholders and all that is needed is:<ul><li>Majority of the minority shareholders voting</li></ul>The bar is set low.&nbsp;But the offer is extremely low as well; at 3x EV/EBITDA on forward basis.&nbsp;The offer is at a discount to Indian E&amp;P Comps and also to the previous offer by VEDL back in 2011 for a stake in CAIR.&nbsp;Foreign shareholders are likely to vote against the merger.However, Cairn Energy's decision is difficult to predict.&nbsp;The merger could have possible implications on the restriction by the Tax Authorities on their stake in CAIR. If the implications are largely positive, it could&nbsp;push them to accept the deal at a price lower than what they sold back in 2011.

On the 9th of June 2015, there was Media Speculation on the potential merger of Vedanta Limited ("VEDL") and Cairn India Limited ("CAIR").&nbsp;VEDL, CAIR's promoter with a majority stake, made an announcement&nbsp;with regards to the media speculation, stating that their strategy is to simplify and consolidate its corporate structure.&nbsp;On 14 June 2015, VEDL and CAIR&nbsp;announced&nbsp;that they would be merging via a share swap scheme of amalgamation under the India Takeover Law.&nbsp;Deal value ~ USD 2.4 BnMinority shareholders of CAIR will receive for each equity share held:1 equity share in VEDL1 redeemable preference share in VEDL with face value INR 10Key ingredient needed for the deal is the approval by CAIR shareholders and all that is needed is:Majority of the minority shareholders votingThe bar is set low.&nbsp;But the offer is extremely low as well; at 3x EV/EBITDA on forward basis.&nbsp;The offer is at a discount to Indian E&amp;P Comps and also to the previous offer by VEDL back in 2011 for a stake in CAIR.&nbsp;Foreign shareholders are likely to vote against the merger.However, Cairn Energy's decision is difficult to predict.&nbsp;The merger could have possible implications on the restriction by the Tax Authorities on their stake in CAIR. If the implications are largely positive, it could&nbsp;push them to accept the deal at a price lower than what they sold back in 2011.

Cairn / Vedanta Ltd  - Offer is disappointing, minorities are left with the shorter end of the stick

Cairn India Ltd

Cairn / Vedanta Ltd - Offer is disappointing, minorities are left with the shorter end of the stick