Cairn Energy completed the sale of 10% Stake in Cairn India to Vedanta

Scottish explorer Cairn Energy on 11 July 2011 completed the sale of 10% stake in its Indian arm, Cairn India, to Anil Agarwal’s London-listed mining group Vedanta Resources for $1.5 billion.

The completion of the sale marked the first tranche of share transfer between the two entities.

Vedanta acquired 191.92 million Cairn India stocks at Rs 355 a share. The total cash payout worked out to Rs 6813.16 crore.

After the purchase of 191,920,207 shares on 11 July, Vedanta raised its holding in Cairn India to 28.5%.

Cairn Energy will sell another 30% of its interest in Cairn India subject to the necessary consents and approvals from the government.

Vedanta will continue to work with Cairn Energy to secure the necessary consents to complete the purchase of a further 30% of the fully diluted share capital of Cairn India.

Cairn Energy remains majority shareholder of Cairn India, with 52.2% holding even after the share sell to Vedanta.

Vedanta had agreed in August 2010 to buy 40%-51% stake in Cairn India, but later lowered shares it intended to buy to just 40%.

It was to pay Cairn Energy Rs 405 per share, including a Rs 50 per share non-compete fee.

The government however held back its approval as it wanted Cairn to settle long-pending issues of royalty payment with ONGC and a tax arbitration case against the government.

Cairn Energy in the backdrop of the issuance of government directives decided to forego Rs 50 per share to make up for revenue loss Cairn India may face if conditions on royalty and cess are accepted.