A budding bidding war to impede a smooth takeover of Cairn India, complicate proceedings for Cairn Energy
Things have only gotten more complicated for Cairn Energy since the company agreed to sell its Cairn India branch to Vedanta in a takeover bid. Three local state- run companies have now begun negotiations to enter the buyout proceedings with their own bids. The new players have rallied to put forth a $13 billion offer that easily overshadows the initial $9 billion proposal that Vedanta offered to Cairn. Some Indian experts have however stated that the sum is far too extravagant for the nation to afford, and that national pride is hindering a potentially profitable deal that allowing Vedanta the takeover would yield.
The first interruptions in the seemingly closed deal occurred when government officials insisted that the local Oil and Natural Gas Corp., who owns 30% of Cairn India must exercise its first right of refusal right. Once ONGC stepped into proceedings, further state interest arose, with Gail India, a local natural gas giant, and Oil India lodging in their intentions of coming in on the deal that has only seen complication since ONGC’s arrival into the fold.
Several international banks have aided the local companies with over $10 billion in loans, allowing them to make the superior bid.
Cairn Energy representatives stated that Vedanta’s standings in the deal are still as the primary bidder, yet they added that the company will certainly consider other options that have been presented to them.
It is still unclear whether ONGC is even interested in the takeover, as the company has had several meetings with Cairn Energy to discuss details of the proceedings, yet no offer has been put on the table by the firm. Cairn is required to gain governmental approval before finalising the deal, yet a loophole is found here that allows the company to go ahead with the buyout if the exchange is performed at the highest corporate level.
Since the actual ownership of the explored field will be kept by Cairn India, some experts have suggested that the possible takeover will happen on a purely corporate level, and thereby does not warrant governmental participation or permission.
The state’s officials have however announced their discomfort with the UK- based Vedanta owning the Cairn India, and stated that the local ONGC will have to be given first right of choice before any final signatures are forged on the deal.