Vedanta, Cairn boards to meet today on merger

Cairn India  said on Saturday that its board of directors would meet on Sunday to deliberate on the proposed merger with Vedanta Ltd (formerly Sesa Sterlite). In a BSE filing, Cairn India said: “A meeting of board of directors of the company will be held on June 14, 2015, inter alia, to consider and evaluate amalgamation of the company with Vedanta Limited.”

“Board meeting of the officials will commence  at 11 am and is expected to last till 1 pm,” said a source close to the development. Following the meeting, the Anil Agarwal-led company will be holding a press conference here.

The London-listed Vedanta Resources in a regulatory filing earlier this week said that “should a transaction with Cairn India proceed, it could potentially be considered a reverse takeover.” A reverse merger would mean Vedanta would merge into cash cow Cairn India. The merger is aimed at helping Vedanta lower its debt by giving it access to Cairn India’s cash reserves of Rs 16,000 crore. The standalone debt of Vedanta — excluding liabilities of subsidiaries — was Rs 37,636 crore on March 31, 2015.

“Merger with Cairn India will improve Vedanta’s standalone balance sheet and interest coverage as well. This becomes a priority, more so given the delay in buying out government stake in cash rich Hindustan Zinc,” said a Macquarie Research report. “Media reports suggest a merger ratio of 1:1. If the ratio as indicated by media report is true, it is lucrative for Cairn minorities.”

In 2011, Vedanta had acquired majority control of Cairn India for $8.67 billion. It holds 59.9 per cent in the oil explorer through its various units as of March 31. As a prelude to the merger, Vedanta had bought some of the shares held by Chairman Anil Agarwal’s Twin Star Mauritius Holdings earlier in the month to raise its stake in Cairn India to 23.71 per cent from 18.73 per cent. Twin Star now holds 34.43 per cent in Cairn India.