Panel of two ids to oversee minority interest

Board reminds AGM that deal depends on regulatory okays.

Cairn India, a unit of Edinburgh-based Cairn Energy Plc, has set up a two-member panel to look into minority shareholders’ interests in the takeover deal by Vedanta Resources.

The panel will consist of independent directors Omkar Goswami and Edward Story. Neither are on the boards of Cairn Energy or Vedanta Resources.

Last month, the UK-based Vedanta Group agreed to buy a 51-60 per cent stake in Cairn India for $8.5-9.6 billion in Cairn India. Cairn Energy holds a 62.36 per cent stake in its Indian unit.

Addressing the press after its annual general meeting here today, Bill Gammell, CEO of Cairn Energy Plc and chairman of Cairn India, said: “The directors (on board), in one way or the other, may have conflict. Thus, it is importance to have a committee that can look into the related issues.”

Omkar Goswami told reporters, “We are both independent members and so we can ensure the transaction moves on with absolute independence. We are looking at various matters of transactions. One of them being the offer made to minority shareholders and that extended to Cairn Energy Plc. We did ask the chairman of Cairn India whether the difference can be eliminated...under Section 20(8) of the Sebi Takeover Code, up to 25 per cent premium can be given as non-compete fee. This Rs 50 is only 14 per cent of the offer size, so that is no clear legal deviation.”

Under the deal, Vedanta will pay Rs 405 per share to Cairn Energy, including a non-compete fee of Rs 50 per share, while it has made an open offer to Cairn India shareholders at Rs 355 (offer price sans the non-compete fee). The open offer will start on October 11.

Shareholders that Business Standard spoke to said they were happy with the deal. “We are happy with the progress of Cairn India and also with the deal. We, however, would not tender our shares in the open offer,” said two shareholders.

Gammell added that the deal hasn’t concluded, as it requires regulatory approval from the UK and Indian governments.

“Sebi (the Indian equity markets regulator) will look at the financials of the transaction and will decide on the open offer price. We will seek all necessary approvals from the government,” Gammell said, adding that Cairn India’s skill-sets were its people and the company would retain the management structure even after the change of ownership.

“This is a corporate transaction involving change of shares at the corporate level. Cairn India is about its people and the knowledge resides in these people and not in Cairn Energy Plc,” he said, clarifying doubts on whether Vedanta’s lack of experience in the energy sector could become a stumbling block in obtaining the necessary approvals.

Gammell in his speech, also said that Cairn India expected to remain profitable in the current financial year, based on its current production level of 125,000 barrels of oil per day (bopd) from its Rajasthan field at Barmer. The field is Cairn India’s key asset, whose current production accounts for about 17 per cent of India’s total crude output.

“In addition, the current estimate of the resource base in Rajasthan provides a basis for our vision to produce at least 240,000 bopd from the block, subject to regulatory approvals and additional investments,” Gammell said in his address to the shareholders.