Vedanta limited and Cairn India announce revised terms for merger

The Boards of Vedanta Limited, Cairn India Limited and Vedanta Resources announced the revised and final terms of the merger between Vedanta Limited and Cairn India as announced on 15 June 2015.

According to the new merger terms each Cairn India minority shareholder will receive against each equity share held:
 
• 1 equity share in Vedanta Limited
• 4 Redeemable Preference Shares worth INR 10 in Vedanta ltd, with a coupon of 7.5% for a tenure of 18 months
• Implied premium of 20% to one month VWAP of Cairn India share price.
 
The current commodity market situation further strengthened the strategic rationale of the merger.  The merger is expected to stabilize cash flow of both the companies.  Furthermore there is strong historical evidence of the success of diversified resources companies generating total shareholder returns superior to single-commodity companies. The merger will also result in improved ability to allocate capital to the highest return projects across the portfolio and facilitate better financial flexibility to sustain strong dividend distribution.  Cost savings and better capital efficiency is another factor the merging is looking at. The merger is in the lie of Vedanta group’s corporate strategy to simplify the Group structure.
 
The merger terms also offer significant benefits for Cairn India shareholders with attractive transaction terms, de-risked earnings and stable cash flows supporting investment and dividends. Moreover, an exposure to Vedanta Limited's world class metals and mining assets - low cost, long life and well invested, delivering strong growth through production ramp ups. The potential stock market re-rating of the merged company is also another positive outcome to be expected.

The Courts have convened the shareholder meetings for each of Vedanta Limited and Cairn India on 8 September 2016 and 12 September 2016, respectively.
 
After the transaction, Vedanta plc ownership in Vedanta Limited is expected to decrease to 50.1% from the current 62.9%. Cairn shareholders will own 20.2% and Vedanta shareholders will own a 29.7% stake in the enlarged entity.

Anil Agarwal, Chairman of Vedanta Resources plc, said: "I am pleased that the Boards of Cairn India and Vedanta Limited have approved the terms announced today. The simplified corporate structure will better align interests between all shareholders for the creation of long term sustainable value."
 
Sudhir Mathur, CFO and Acting CEO of Cairn India is also of the view that Cairn India shareholders will benefit from exposure to a diversified portfolio of world-class, low cost, long-life assets with significant growth.

Tom Albanese, CEO of Vedanta Limited, said: "The strategic rationale for merging Vedanta Limited and Cairn India remains highly compelling. Diversified resources companies have delivered superior returns for shareholders historically. The Transaction consolidates our portfolio of attractive Tier-I assets and simplifies the group structure, better positioning the group to deliver superior value to all shareholders over the longer term."

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