Vedanta to get Rs 500 cr if Cairn buyout fails

Vedanta Group, pursuing a $9.6 billion takeover of Cairn India, will get an estimated windfall of Rs 500 crore if the target firm's Scottish promoters fail to get shareholders' nod for the deal or solicit a rival bid.

NRI billionaire Anil Agarwal-run Vedanta Group has reached a deal with Cairn Energy to acquire up to 60 per cent stake in the Edinburgh-based firm's Indian unit Cairn India, the country's fourth largest oil explorer.

The deal requires approval from the shareholders of all the entities involved including the seller Cairn Energy.

As per the terms of the deal, "if Cairn Energy's shareholders do not approve the transaction of it the sellers breach their non-solicit obligations, the sellers are required to pay a break fee of 1 per cent of Cairn Energy's market capitalisation to the acquirer."

The deal terms also bar Cairn from soliciting any rival offer before the meeting of Cairn Energy's shareholders for considering approval for the transaction.

"Prior to the meeting of shareholders of Cairn Energy, the sellers are prohibited from soliciting any person to make competing proposal," as per the Share Purchase Deed between Cairn Energy and Vedanta Group. The agreement also requires a shareholder meeting to be convened on or before October 30.

Considering the current market valuation of Cairn Energy, the break fee comes at 66.9 million pounds (about Rs 500 crore). At present share price, Cairn Energy is valued worth 6.69 billion pounds.

Cairn Energy is listed on the London Stock Exchange (LSE) and in the early trade the stock was quoting at 4.78 pounds.

Vedanta Group, through its India-listed group firm Sesa Goa, has already made an open offer for a 20 per cent stake in Cairn India and the offer begins on October 11. The Rs 13,631 crore offer closes on October 30.

Under the agreement, London-based Vedanta plans to acquire 51-60 per cent stake in Cairn India through purchase of Cairn Energy Plc's stake and through open offer.

 Sesa Goa is offering a price of Rs 355 per equity to the public shareholders of Cairn India, the owner of the India's largest onland oilfield.