Cairn energy has cut the price tag for its deal to sell control of Indian assets by more than $600m. The surprise move was announced shortly before the London stock market closed last night, with Cairn and Vedanta saying that the deal price would fall to just over $6bn from $6.65bn.
The reduction was down to the removal of a non-compete clause, which would have prevented Cairn from exploring in India, Pakistan, Sri Lanka and Bhutan after selling control of its oil fields in the western Indian state of Rajasthan.
There was also a change to the mechanics of the sale. The deal will now be completed in two tranches, with Vedanta initially buying a 10 per cent stake in Cairn India from its UK-listed parent by 11 July. That, along with shares bought from Malaysia's Petronas and an open offer, will take Vedanta's interest in Cairn India to around 28 per cent.
The second tranche will consist of a 30 per cent stake, which will remain subject to approvals from the government of India. Though announced last summer, the deal has yet to be cleared by the Indian cabinet amid a dispute with the state-owned ONGC, which owns a minority interest in the fields. It is seeking a review of the royalty arrangements to go with the change in control – something that is opposed by Cairn and Vedanta.