Cairn India buyout in jeopardy due to ministry indecision
The massive takeover that will cost the purchasing company Vedanta almost $10 billion is in jeopardy, as the local ministry of natural gas, petroleum and other conventional fuels has announced that it wants the state- based Oil and Natural Gas Corporation the right to first refusal on the deal.
Cairn India is a long- time partner of ONGC, and the two have long since been overlooking Cairn’s oil production in the nation. ONGC currently holds a 30% stake in the venture, and was initially appointed and primed as the set buyer for Cairn.
That factor may become the final factor in the Vedanta’s deal falling through. The representative from India’s petroleum industry that refused identify himself stated that the local ONGC is to have first right of refusal, just as initially planned.
The British- based Vedanta was fixed to take over 60% of the company when the news came through. The open offer proposed by the venture would have seen Cairn’s shares be sold for ‘405 each, followed by a ‘355 price to the company’s top shareholders, which would have gained Vedanta another 20% of shares.
The takeover was already plagued with other regulatory worries and stipulations propagated mostly by the local petroleum niche. Problems like tax implications, and share pricings were raised repeatedly by the company’s smaller shareholders, refusing to agree to the open offer wielded by Vedanta.
The country’s government had already expressed its desire to hold the power of final veto over the deal, and once ONGC put forth potential interest in its first use right; Vedanta’s seemingly sealed contract was put on hold.
The British venture however stated that they are still sure of their standings in the deal, and that they expect to purchase the company despite the newly arisen complications.
ONGC and Cairn also have an outstanding and unresolved royalty issue that will need to be put to rest if a counter offer is to be presented for the buyout.
Representatives from ONGC are yet to make any extensive comment on their potential desire to extend a counter offer for Cairn, or discuss their financial implications with the company. Yet the venture has voiced a definite possibility that the counter offer may be made.
At this point, it is clear that time will only tell whether Vedanta will go ahead with its ambitious takeover, or if the local company will come out on top. The sensitive matter is currently clouded in mystery, as officials from all sides are refusing to comment until more progress is made in the deal.