Vedanta makes $2.3 bn bid to buy out minorities in Cairn India

Shareholders in Cairn India, India's top private sector oil producer, will get one share in Vedanta Ltd for every share held, the companies said in a joint statement after their boards approved the transaction on Sunday.

The shareholders will also get one redeemable preference share in Vedanta Ltd with a face value of 10 rupees, making the deal worth roughly $2.3 billion. That implies a premium of 7.3 per cent to Cairn's Friday close.

Vedanta began simplifying its complex structure with a 2012 overhaul, but further moves to simplify the group and buy out minorities in cash-rich units have long been awaited by the market. Cairn India has a $2.6 billion cash pile.

The merger, trailed over the past week and announced on Sunday, is the first major step under chief executive Tom Albanese, the former Rio Tinto boss appointed last year, to streamline the group and help cut back its debt.

London-listed Vedanta Resources Plc, controlled by one-time scrap metal dealer Anil Agarwal, currently holds a majority interest in Mumbai-listed operating unit Vedanta Ltd, which in turn holds a 59.88 per cent stake in Cairn India.

Vedanta Ltd also holds other assets, including a stake of about 65 per cent stake in Hindustan Zinc, expected to be the next target of the group's clean-up effort.

Albanese said in the company statement on Sunday that the deal would result in improved financial flexibility to allocate capital to the highest return projects and sustain strong dividends.