Close on the heels of the Cabinet Committee on Economic Affairs (CCEA) referring the proposed takeover of Cairn India by the Vedanta Group to a Group of Ministers (GoM), Cairn Energy PLC on Thursday announced the extension of the deal deadline to May 20.
The original deadline set by Cairn Energy and Vedanta for the deal closure was April 15. This extension, Cairn Energy says, is to accommodate the completion of the open offer by Sesa Goa (a Vedanta Group company) to Cairn India's minority shareholders.
Earlier on Wednesday, Sesa Goa announced receiving SEBI approval for the open offer, scheduled to commence on April 11 and close on April 30. Despite not receiving the Government's approval (conditional or otherwise) for the deal on Wednesday evening, Vedanta announced its intention to go ahead with the open offer as planned. In its announcement, Cairn Energy plc says, “To meet Indian takeover regulations, the open offer must be made to the minority shareholders of Cairn India and completion of the open offer is a condition precedent to the completion of the transaction. Cairn and Vedanta have extended the long stop date in the sale agreement, by which all conditions must be completed or waived (where permitted) to May 20, 2011, in order to accommodate the completion of the open offer.”
Besides, to comply with SEBI's stipulation and to allow the open offer to proceed, Cairn Energy and Vedanta have agreed that the put and call options exercisable by them respectively shall not be enforceable or exercisable. A similar undertaking has been agreed to by Vedanta with regard to its pre-emption right.
Sebi notification
This has been done to comply with SEBI's notification to Vedanta that the options and pre-emption right be removed from the sale agreement as they do not comply with certain Indian securities regulations. As part of the original transaction announcement in August 2010, Cairn Energy and Vedanta entered into two reciprocal put and call options. This was to ensure that a majority interest in Cairn India could be sold to Vedanta. One put and call option was exercisable after July 1, 2012, and the other after July 1, 2013, both at a price of $8.66 (Rs 405). These options were in respect of the difference in the number of Cairn India shares sold to Vedanta and 51 per cent of Cairn India's share capital at completion.
Cairn Energy had also agreed to give Vedanta a matching pre-emption right over any subsequent disposal of Cairn India shares by the former. This right was to be applicable if the disposal resulted in the intended recipient acquiring more than 20 per cent stake in Cairn India.