Cairn and Vedanta agree open-ended deadline

Cairn Energy has extended the deadline for completing the $9.6bn (£5.9bn) sale of its Indian unit to Vedanta, the London-listed, Indian-focused mining company, while awaiting New Delhi’s blessing for the deal.
In a statement, the British oil explorer said it was not setting any new deadline but that the two companies had agreed to “extend the closing date on their sale and purchase agreement in order to secure the necessary consents and approvals from the government of India to complete the transaction”.
At Thursday’s annual meeting in Edinburgh Sir Bill Gammell, Cairn’s founder and chief executive, told shareholders he “hoped to get a satisfactory conclusion in a short period of time”. He added: “In India you need the three P’s: positive, patience and perseverance.”

In August Cairn agreed to sell to Vedanta – the metals mining company founded by the self-made, Indian-born billionaire Anil Agarwal – up to a 51 per cent stake in its strategically important Rajasthan oilfields. But the deal became bogged down by the process of obtaining government clearance, due to an unresolved royalty dispute between Cairn and the state-owned Oil and Natural Gas Company, a joint venture partner in the Rajasthan fields.

The Congress-led government is to decide whether it should require a settlement of the dispute as a precursor to the sale, or rather to allow Vedanta to take over the company, and then to let ONGC contend with the new owners to settle the dispute.

New Delhi has been dithering over a decision, forcing Cairn and Vedanta to repeatedly extend their deadline for closing the deal. Sir Bill had previously described the proposed sale as a litmus test of whether foreign companies can actually exit from Indian investments in a time and manner of their choosing.

The two companies had hoped New Delhi’s cabinet committee on economic affairs was poised to make a decision in early April. Instead, the cabinet referred the issue to a group of ministers, which has yet to meet but is expected to do so later this month, prompting the latest extension. The last deadline was due to expire on May 20.

Over the past month, Vedanta has acquired an 18.5 per cent stake in Cairn India, picking up a 10.3 per cent stake in a block deal with Malaysia’s Petronas, and another 8.1 per cent holding by a mandatory open offer to minority shareholders of Cairn India.

The companies have agreed that Cairn will sell a 40 per cent sake to Vedanta, retaining a 21.7 per cent interest in the business.