Vedanta Said to Seek 55% Stake in Cairn Energy's India Unit

Vedanta Resources Plc, controlled by billionaire Anil Agarwal, is near an agreement to buy 40 percent of Cairn Energy Plc’s Indian oil unit for about $6.5 billion and plans to purchase shares from investors to boost its stake to about 55 percent, said three people with knowledge of the plan.

Vedanta will buy the stake in Cairn India Ltd. and then purchase the additional shares through a so-called off-market tender offer, said the people who declined to be identified as the talks are private. The deal, valued at about $8.5 billion, may be announced as soon as today, and London-based Vedanta will finance the transaction partly with loans from Standard Chartered Plc, the people said.

Vedanta expects to be able to buy between 10 percent and 15 percent through the tender, the people said. Under India’s takeover regulations, investors seeking 15 percent or more of a listed company must make a public offer for at least a 20 percent stake. Cairn India, 62 percent held by Edinburgh-based Cairn Energy, is listed in Mumbai and valued at about $14.4 billion.

Spokesmen for Cairn Energy and Vedanta declined to comment.

Vedanta’s planned foray into the oil industry, which will give it access to Cairn India’s Mangala deposit, the country’s biggest oilfield on land, marks a departure from mining zinc, copper and iron ore. Agarwal, 57, has already sought to expand in power generation, helping his Sterlite Industries unit compete with rivals such as Reliance Energy Ventures Ltd. and NTPC Ltd.

Vedanta follows BHP Billiton Ltd., the world’s largest mining company, in adding oil assets. BHP, which moved into oil and gas with its 2001 acquisition of Billiton Plc for $11.6 billion, reported sales of $7.2 billion for its petroleum business, or 15 percent of total revenue, in fiscal 2009.

Mangala Field

Cairn India started output a year ago from the Mangala field in Rajasthan, selling to customers including Indian Oil Corp. In March, the company raised its production target from the field to 240,000 barrels a day. Cairn India has interests in 10 blocks in India and one in Sri Lanka. It has three in production, including Mangala. Petroliam Nasional Bhd., known as Petronas, holds a 14.9 percent stake in the company, according to data compiled by Bloomberg.

Vedanta was the first Indian company to list its shares on the London Stock Exchange in 2003, according to its website, and employs 30,000 people with operations in India, Australia and Zambia. The company said in 2008 it would spend $20 billion in India over four years on mines and power plants.

Cairn shareholders may receive at least 1 billion pounds ($1.6 billion) in special dividends as a result of the transaction, the Sunday Telegraph reported yesterday, citing people it didn’t identify.