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| Cairn chief meets ONGC head on Vedanta deal |
| BS Reporter / New Delhi Sep 17, 2010, 00:15 IST |
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Cairn Energy's chief executive, Bill Gammell, had a “good” meeting here with Oil and Natural Gas Corporation Chairman and Managing Director R S Sharma on the former's deal with London-based Vedanta Resources to sell it majority stake in Cairn India, its subsidiary.
Cairn India is operator of the Barmer oil block in Rajasthan (the country's largest inland oilfield), with a 70 per cent participating interest, and its joint venture partner, ONGC, has a 30 per cent participating interest. Average crude oil production from the block is 125,000 barrels per day.
Cairn is selling between 40 and 51 per cent stake in Cairn India — operator of the nation's largest onland oilfield — to London-listed Vedanta for $6.65 billion to $8.48 billion.
ONGC insists that Cairn Energy cannot sell a stake to Vedanta without its approval, as it has the preemption or right of first refusal (ROFR) by virtue of its participating interest in the Rajasthan oilfield and two other producing assets of Cairn India.
Gammell met Sharma for the second time since announcing the deal on August 16. Cairn Energy, he said, believes the deal does not trigger ONGC's preemption right, as it is a corporate transaction between two parties and not the sale of stake in any particular field that normally gives partners ROFR. He, however, refused to say if ONGC had diluted its position.
Clear all taxes
Speaking later to journalists, Gammell said Cairn Energy would meet all tax liabilities, both in India and Britain, arising out of the mega deal with Vedanta Resources. "We will pay all the taxes (due) in UK and India," he said. The tax will be "several hundreds of millions of dollars".
According to analysts, if Cairn Energy was to eventually sell only 40 per cent out of its 62.38 per cent stake in Cairn India for $6.65 billion, the combined tax liability in India and UK would be around $868 million. But if it was to sell 51 per cent for $8.48 billion, the tax liability would be $1.1 billion. Vedanta is to acquire a 40 per cent stake from Cairn Energy and make an open offer for an additional 20 per cent to minority shareholders of Cairn India. If the open offer is not fully subscribed, Cairn Energy will sell the additional shares, but with a cap of 51 per cent, to make up for the shortfall.
Vedanta Resources' group company Sesa Goa is yet to get market regulator Sebi's approval for an open offer to acquire up to a 20 per cent stake from minority shareholders at a price of Rs 355 a share, Rs 50 less than what it is paying Cairn Energy for a majority stake.
The conclusion of the deal is "conditional to completion of open offer in India," Gammell said today. The open offer, as announced by Vedanta last month, is to open on October 11. Gammell said Cairn Energy will call an extraordinary general meeting of its shareholders in early October to seek ratification of the Vedanta deal.
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