Cairn Energy Plc (LON:CNE), the Edinburgh based oil and gas group, has announced plans to sell up to 51% of its stake in Cairn India to diversified mining group £VED. Cairn India is one of two operating divisions at Cairn and was floated in Bombay and the National Stock Exchange of India in January 2007, leaving Cairn with a 62.39% interest in the business. The other side of Cairn’s business is the 100% owned exploration arm, Capricorn Oil. Today’s deal will see Vedanta pay up to US$8.48bn for the interest in Cairn India – or US$8.66 per share –giving it a substantial footing in the company’s 11 acreage blocks in India and Sri Lanka.

Cairn said that it intended to return a substantial proportion of the proceeds from the transaction to its shareholders while retained cash would give it the financial flexibility to pursue an active exploration programme in its acreage position in Greenland and future growth opportunities. The deal will also see Cairn maintain exposure to Rajasthan through its retained shareholding in Cairn India. Shares in Cairn responded by rising 3.25% to 483.5p while shares in Vedanta rose by nearly 5% to 2155p.

Sir Bill Gammell, Cairn’s chief executive, said: "I am delighted to announce the proposed disposal of a significant shareholding in Cairn India in line with our objective of adding and realising value for shareholders. The transaction will result in a substantial return of cash to shareholders. The transaction will also ensure we have the financial flexibility to focus on an active multi year exploration and drilling programme in Greenland and also consider further material growth opportunities."

Anil Agarwal, Vedanta’s executive chairman, said: “The proposed acquisition significantly enhances Vedanta’s position as a natural resources champion in India. Cairn India’s Rajasthan asset is world class in terms of scale and cost, delivering strong and growing cash flow. The company has a proven management team and very significant further resource potential. Cairn India will benefit from Vedanta’s track record of acquiring and growing world class companies, especially in India.

The IPO of Cairn India in 2007 provided a return of cash to Cairn shareholders and created sufficient financial headroom for the company to fast-track the development of its world-class discoveries in Rajasthan. With the first phase of those developments now complete, the project is now producing approximately…

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