Cairn writes off $600 million to save Vedanta deal
28 Jun 2011
In what could be the last twist before a long-delayed deal, Cairn Energy Plc on Monday said it would forgo Rs50 per share non-compete fees to push through the sale of majority stake in Indian subsidiary to Vedanta Resources Plc.
This would mean a cost of acquisition $600 million or Rs2,700 crore less for Vedanta.
The Cabinet Committee on Economic Affairs (CCEA) is to meet on Thursday, however, it is not clear whether the final stamp of approval to the deal would be given then.
According to analysts by foregoing fees, Cairn is providing Vedanta some room to negotiate with the government when it comes to its share of royalties.
Vedanta would now take a 40-per cent stake in Cairn India in two tranches at Rs355 per share, with the first tranche of 10 per cent being bought on or before 11 July.
The removal of the non-compete fee condition would translate in 9.35 per cent reduction in the effective sale price of $8.66 per Cairn India share to $7.85.