Vedanta resources has snapped up a 10.4 per cent stake in Cairn India for about £920m, in a signal of its determination to take control of the oil company, even as political uncertainty hangs over the deal.
The miner, which is trying to make its first foray into the oil business, bought the shares from Petronas, the Malaysian state oil company, which is cutting back its overseas portfolio.
Vedanta is awaiting the Indian government's approval of the agreement to buy up to 51 per cent of Cairn India from its parent, Cairn Energy. It has also launched an open offer to minority shareholders to buy up to 20 per cent of Cairn India.
Analysts characterised yesterday's purchase as opportunistic. The miner paid 331 rupees (£4.56) apiece for the Petronas shares, less than the Rs335 per share it will pay to Cairn India shareholders who accept the open offer. That offer was launched on 11 April and closes on 30 April. Depending on the response, Cairn Energywill sell at least 40 per cent and up to 51 per cent of the company to Vedanta.
"This is a strategic move by Vedanta, and it makes the [ongoing] open offer inconsequential," said Jagannadham Thunuguntla at the SMC Global Securities brokerage.
The addition of the 10.4 per cent stake means that Vedanta could end up owning up to 70.4 per cent of Cairn India. However, everything hinges on the government in Delhi, which has refused to sign off on a change of control from Cairn Energy to Vedanta.
"Vedanta will now be able to get a comfortable controlling stake in Cairn India even if the open offer response is very poor," said Mr Thunuguntla. "But all this is subject to the government clearing the deal and that is an unknown factor."Reuse content