Indian natural resources company Vedanta Resources has signed a merger agreement to integrate its two units Cairn India and Vedanta in all-share deal worth $2.3bn.
The merger of Cairn with the mining unit Vedanta is expected to help the parent company Vedanta Resources in repayment of debts.
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According to the terms of the agreement, each Cairn India stakeholder will get equity share and one redeemable preference share of Vedanta, for every share held.
The parent firm expects the transaction to further simplify its internal processes and boost its productivity.
Vedanta Resources chairman Anil Agarwal said: "The merger of Cairn India and Vedanta Limited consolidates our position as India’s leading diversified natural resources champion, uniquely positioned to support India’s economic growth."
This merger brings together the Tier-I assets portfolio of Vedanta, which when combined with strong management, is likely to offer superior returns for the shareholders, the company claimed.
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By GlobalDataVedanta CEO Tom Albanese said: "It will result in improved financial flexibility to allocate capital to the highest return projects and sustain strong dividends."
Cairn India CEO Mayank Ashar said: "The merger with Vedanta Limited will generate additional value for our shareholders and de-risks Cairn India by providing access to a portfolio of diversified Tier-I, low cost, long-life assets, to deliver significant near term growth.
"Our Rajasthan fields continue to remain our core asset.
"The financial strength of the enlarged group will ensure greater access to capital to further Indian oil & gas development."
The transaction is likely to be completed within the first quarter of 2016 following approvals from individual shareholders of the three involved entities along with other customary approvals.
Once concluded, the parent firm will own 50.1% stake in Vedanta Limited.
Cairn India will be the owner for 20.2% shares in the enlarged entity, while Vedanta shareholders will hold remaining 29.7% stake.
