ONGC must pay $13b to acquire Cairn India

Aug 19, 2010 |

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Aug. 19: State owned Oil and Natural Gas Corp (ONGC) may have to pay over $13 billion if it were to exercise its right of first refusal to buy Cairn India in the giant Rajasthan block.

Cairn India holds 70 per cent operator interest in the 6.5 billion barrels Rajasthan block that is at the centre of its parent, Cairn Energy Plc’s $ 8.48 billion deal to sell its majority stake in the firm to Vedanta.

At Rs 355 a share (the price at which Vedanta is acquiring Cairn Energy shares), Cairn India is valued at over Rs 67,355 crore or $14.6 billion. Almost 90 per cent of this value is because of the Rajasthan block that can produce 240,000 barrels of oil per day (12 million tonnes per annum).

“Cairn India’s stake in Rajasthan block will be valued at $ 13 billion,” a source involved in the process said. ONGC believes that by virtue of holding 30 per cent in the Rajasthan block, it has the pre-emption or ROFR to buy Cairn India in case the company’s ownership changed. If it has objections to the Cairn-Vedanta deal, it will have to seek to buyout Cairn India in the Rajasthan block by making a higher offer that would work out to $13 billion, he said.

But ONGC will have make up its mind fast as it has time only till September 7 to decide. Vedanta’s open offer to minority shareholders of Cairn India for acquisition of 20 per cent shares, puts September 7 as the cut off date for any rival offer, the source said.

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