ONGC sends notice to Cairn Energy
Oil and Natural Gas Corporation (ONGC) today said it has sent a reminder to UK based Cairn Energy regarding the proposed sale of shares of Cairn India Ltd. to billionaire Anil Agarwal-led Vedanta Resources.business Updated: Sep 13, 2010 13:11 IST
State-owned Oil and Natural Gas Corporation (ONGC) today said it has sent a reminder to UK based Cairn Energy regarding the proposed sale of shares of Cairn India Ltd. to billionaire Anil Agarwal-led Vedanta Resources. ONGC sent the reminder on September 10, ONGC said in a filing to the Bombay Stock Exchange.
Vedanta is offering USD 8.48 billion to buy up to a 51 per cent stake in Cairn India, which has 10 oil assets in the country, including the giant Rajasthan oilfield.
On August 30, ONGC, which is a 30% shareholder in Cairn India's Rajasthan block, had asked Cairn Energy Plc to provide all the details related to the agreements between the company and the proposed buyer.
In a letter written to Cairn Energy Plc Chief Executive, Bill Gammell, ONGC Company Secretary N K Sinha had sought details of the Vedanta deal, stating the Edinburgh-based firm required "consent of ONGC besides other governmental approvals to consummate the proposed" sale of up to a 51 per cent stake in Cairn India to London-listed Vedanta.
ONGC believes that by virtue of its stake in Rajasthan block, it has the preemption or right of first refusal to buy Cairn India in case the company's ownership changed.
"... It is noted that ONGC has, inter-alia, preemptive rights in relation to Cairn's participating interest under the various agreements with the government of India and ONGC and that Cairn Energy Plc and/or its affiliates require consent of ONGC besides other governmental approvals to consummate the proposed transaction," he wrote.
ONGC has requested "full details along with copies of the agreements and other arrangements entered into between Cairn Energy Plc and its affiliates and the proposed buyer."
Interestingly, the Joint Operating Agreement between Cairn India and ONGC gives partners preemption rights in case of the sale of interest by either parties in the block, but not in the case of a corporate ownership change, which is what is happening in the Cairn-Vedanta deal.
If Cairn Energy had offloaded its stake in the stock market, like it did when it in the past couple of years sold as much as 14 per cent in Cairn India to Petronas of Malaysia, ONGC couldn't have done much, industry observers had told PTI.
If it exercises its preemption right, ONGC may end up paying between USD 12 to 13 billion at the Rs 355 a share price at which Vedanta is acquiring Cairn Energy's shares in Cairn India.
Shares of ONGC zoomed 2.39 per cent to hit a new high of Rs 1,388 in early trade on the BSE today, while Cairn India was trading 0.47 per cent higher at Rs 328.