vedanta cairns india deal
TRANSCRIPT
Submitted By:-
ANTARKISH YADAV (10)
JANMEJAY GUPTA (32)
SHYAM DOGRA (55)
Vedanta Group Acquisition of Controlling Stake in Cairn India
Agenda
• Vedanta Group
• Cairn India
• Deal Structure
• Synergies
• Pre Acquisition Impact
• Post Acquisition Impact
• Legal & Political Impact
• Current Status
Vedanta Group…a Glance
� Vedanta is an UK based, LSE – listed metals and mining company.
� Vedanta business is principally located in India, one of the fastest
growing large economies in the world.
� Vedanta have additional assets and operations in Zambia and Australia.
� Vedanta are primarily engaged in copper, zinc, aluminum and iron ore
businesses, and are also developing a commercial power generation
business.
� Vedanta have experienced significant growth in recent years through
various expansion projects for copper, zinc and aluminum business.
Vedanta Group Companies
Vedanta Group Vision � MISSION :
�“Our mission is to be a world-class metals and mining group and generate
superior financial returns.”
STRATEGY :
�“Our strategic goal is to create a world-class metals and mining company
and to generate strong financial returns. Our strategy is based on the
following four key pillars:
• Continuing focus on asset optimisation and reducing the cost of production.
• Increasing our capacities through greenfield and brownfield projects.
� Consolidating our corporate structure and increasing our direct ownership of our
underlying businesses to derive additional synergies as an integrated group.
� Seeking further growth and acquisition opportunities where we can leverage our
transactional, project execution and operational skills and experience.
Cairn India….A Glance
� Cairns India is subsidiary of “Cairn Energy plc” ,is a global oil and
gas exploration company headquartered in Edinburgh, United
Kingdom.
� It has operated interests in Albania, Bangladesh, Greenland, India,
Nepal and Tunisia.
� Produces around 33,000 barrels of oil equivalent per day.
� Its largest activities are in India, where it has made more than 20
discoveries in Rajasthan, including a major oil discovery in Mangala.
� As at 30 June 2010 it had total proven commercial reserves of
247.4 million barrels of oil equivalent.
Cairn India Highlights
� Large resource base with significant growth potential.
� Key producing asset substantially de-risked.
� 125,000 bopd production in H2 2010, plan to reach at least
240,000 bopd.
� Low cost producing assets
� Low cost F&D platform ($5/bbl), low opex ($5/bbl).
� Deep skill sets in oil & gas.
� High quality management team.
� Unique position in Rajasthan.
� Excellent HSE track record .
Cairn India:Scale and Growth
Cairn India’s Asset Base
Deal Structure
� Cairn to sell a maximum of 51 per cent of Cairn India to Vedanta.
� Consideration of up to US $8,480m (INR 396,561m), based on US
$8.66 (INR 405) per Cairn India share*.
� A premium of approximately 32 per cent to the Cairn India average
closing price for 90 days prior to 14 August 2010
� Put and call options, exercisable after July 2012 and July 2013, to
ensure a majority interest in Cairn India can be sold (exercisable at
US $8.66 (INR 405))
� Intention to return a substantial proportion of the proceeds from
the transaction to Cairn shareholders.
Deal Structure
� Retained cash will provide Cairn with financial flexibility to pursue an
active exploration programme in its leading acreage position in
Greenland and future growth opportunities.
� Continued exposure to Rajasthan through the retained shareholding in
Cairn India.
� Completion expected before end of 2010.
� For each Cairn India share subject to the Proposed Transaction, Vedanta
will pay Cairn US $8.66 (INR 405) in cash on completion, comprising:
� US $7.59 (INR 355) (pursuant to the sale and purchase
agreement)
� US $1.07 (INR 50) (pursuant to the non-compete arrangements)
Key Transaction Terms
� Vedanta acquiring 51% to 60% of Cairn India for a total consideration of
$8.5bn to $9.6bn.
� Vedanta to acquire a 31% to 40% interest.
� Sesa Goa to acquire a 20% interest.
� Implied equity value of Cairn India of $16.6bn.
� Premium of 21.8% to the undisturbed share price of INR332.602
Subject to shareholder and regulatory approvals
� Immediately EPS accretive for shareholders.
� Funded through debt and cash resources � Expected to close by
Q1 2011
Transaction Details
� Vedanta Group to acquire between 51% - 60% of Cairn India via the
following steps.
� Vedanta Resources Plc to acquire 51% from Cairn Energy
� Sesa Goa to tender for 20% via an open offer
� Vedanta's purchase to be reduced by the shares acquired
under the tender offer to a minimum of 40%.
� If Sesa Goa’s open offer is not fully taken up, it will purchase
shares from Vedanta Plc to reach 20%
� Put and call options written to enable either Vedanta or Cairn Energy to
ensure a minimum of 50% of Cairn India is acquired from Cairn Energy.
Transaction Financing
� Transaction consideration of US$8.5bn to US$9.6bn � Payable on
completion (expected by Q1 2011)
� Funding
� Vedanta Resources: bank debt facilities of up to US$6.5bn, ≥ 2 year
tenure.
� Sesa Goa: c. US$3bn, primarily from cash resources
Synergies : Unique Opportunity to Create Value
� Creating an Indian natural resources champion: comprehensive footprint
across India’s resources sector
� World class asset and management team.
� Leverages Vedanta’s core skills.
� Common operating philosophy: focus on delivery and costs
� Enhances and diversifies Vedanta’s strong growth profile
� Financial flexibility retained and no impact on existing expansion
programmes
� Immediately EPS accretive for shareholders.
Synergies• The Cairn Board believes that the Proposed Transaction delivers
positive benefits in line with Cairn’s strategic goals.
• The IPO of Cairn India in 2007 provided a return of cash to
shareholders and created sufficient financial flexibility to allow the
fast-track development of Cairn’s world-class discoveries in Rajasthan.
• The completion of the first phase of the Rajasthan development
represents a significant milestone for the Cairn Group, with the project
now producing approximately 125,000 barrels per day.
• The Cairn Board therefore believes that now is an appropriate time to
realise further value from its shareholding in Cairn India, whilst at the
same time maintaining exposure to the ongoing business through a
significant retained shareholding.
Pre-Acquisition Impact
� Stock prices of Vedanta Resources fell below normal (London Stock
Exchange), which fell 20 percent last week on speculation of the deal,
were 2.9 percent higher at 1447 GMT on 15 Sep’10.
Stock prices of Vedanta
Pre-Acquisition Impact� Shares in Cairn India ended up 1.7 percent at 338.65 rupees in the main
Mumbai market which was almost flat. had risen as much as 2.4 percent
earlier in the day, after falling sharply on Monday when the deal was
announced. Shares in Cairn Energy were down 1.7 percent in London.
Stock prices of Cairns
Post Acquisition Impact
� Cairn’s strategy is to establish commercial reserves from strategic
positions in high-potential exploration plays in order to create and
deliver shareholder value.
� Cairn has focused on gaining early entry into frontier basin plays such as
in India and Greenland.
� Following completion of the Proposed Transaction, the Cairn Group's
principal focus will be to advance its exploration programme in its
frontier basin positions in Greenland and continue to pursue its proven
strategy of building shareholder value from growth opportunities.
Legal & Political Impact
� Cairn has given certain non-compete undertakings covering the
territories of:
� Bhutan
� Sri Lanka
� Pakistan
� India
pursuant to which Cairn has agreed that, for a period of three years,
Current Status and Post Impact of the deal on 17 SEP ‘10
� Regulatory approval for London-based Vedanta Resources' deal to buy a
controlling stake in Cairn India, a unit of the UK's Cairn Energy, will take
at least a month, the Oil Secretary said on 16th Sept’ 10.
� Cairns have sought the approval of shareholders for the deal & expects
to complete by early October.
� The conclusion of the deal is "conditional to completion of open offer in
India".
� Vedanta has already published an advertisement making an open
offer to the minority shareholders of Cairn India as part of the
takeover exercise, which is slated to open on 11 October.
Current Status and Post Impact of the deal on 17 SEP ‘10 :
• Tussle with ONGC :
• ONGC state-run company has decided to exercise its "pre-emptive right"
in relation to Cairn's participatory interest and has written to the stock
exchanges stating that Cairn Energy needs its nod for the Vedanta deal.
• SEBI is likely to direct the group to disclose the pre-emptive rights of
ONGC to Cairn India’s assets.
• Cairns may also have to disclose the letters it has received from the
environment ministry and even give an undertaking that it will comply
with all the regulatory requirements of the environment and forests
ministry.
Glossary� 2P - Proven plus Probable reserves.
� 2C - Contingent resources.
� 2D/3D - Two Dimensional/Three Dimensional.
� boe - Barrel(s) of Oil Equivalent.
� boepd - Barrels of Oil Equivalent per Day.
� bopd - Barrels of Oil per Day.
� E&P - Exploration & Production.
� EOR - Enhanced Oil Recovery.
� F&D - Finding & Development.
� FDP - Field Development Plan.
� mmboe - Million Barrels of Oil Equivalent.
� mmt - Million Metric Tonne.
� PSC - Production Sharing Contract
� tpa - Tonnes per Annum
� HSE- Health Safety & Environment
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