Life Insurance Corporation of India (LIC) — one of the minor shareholders in Cairn India — is likely to take a final decision in the coming week on the proposal to merge Cairn India with Vedanta. Currently, LIC and Cairn Energy hold 9.06% and 9.82% in Cairn India, respectively.
Sources in LIC said on condition of anonymity: “We are still going through the deal and will soon reach a conclusion. We had sought some clarifications on the valuation criteria and dividend on preference shares. We will inform the company about our decision before the AGM.”
On June 14, the boards of Vedanta, a debt-laden miner, and Cairn India, a cash-rich oil producer, both promoted by industrialist Anil Agarwal, approved a merger of the two companies, through a 1.04:1 share swap in a $2.3-billion transaction, suggesting cash from Cairn would be used to de-leverage Vedanta.
Minority shareholders of Cairn India will get one share of Vedanta for every share held. Apart from that, for every share, Cairn shareholders will receive one 18-month redeemable preference share of R10, carrying a coupon of 7.5% and listed on National Stock Exchange.
On Monday, the Cairn India scrip on the BSE closed at R182.40, down 0.49%, while Vedanta fell 4.45% to close at R163.05. After completion of the merger, Cairn India minority shareholders will hold a 20.2 % stake in the merged entity, while Vedanta’s minority shareholders will own 29.7%.
After the board approved the merger, LIC officials have met officials of Vedanta a couple of times. The related-party transaction hinges on the votes of both LIC and Cairn Energy, who together account for close to 50% of the minority vote.
The merger will require the approval of more than 50% of the minority shareholders, as per Sebi rules.
It will also need approval of more than 75% of all shareholders, including the promoter group, for a statutory clearance, as per Section 230 of the Companies Act.