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Cairn Energy, an Edinburgh-based and London-listed company, has raised about Rs20.5 billion ($366 million) from the sale of a further 3.5% in Cairn India after fixing the price at the bottom of the indicative range.
The sale was done through a block trade that launched close to midnight Hong Kong time on Thursday and closed just before the Indian market opened on Friday (11.30am Hong Kong time).
The deal comprised approximately 66.76 million shares and priced at Rs307.4 per share, which translated into a discount of 6.1% versus Thursday’s close of Rs327.4, a source said. The shares were marketed in a range between Rs307.4 and Rs317.5, or at a 3% to 6.1% discount. However, because some shares were crossed in the stock market at a higher price, Cairn Energy ended up selling the shares at an average price of Rs308.7.
Cairn India’s share price fell 6.1% on Friday, but did finish the day slightly above the placement price at Rs307.55. The stock has fallen 2.1% so far this year, which compares with a 14.2% climb in the S&P CNX Nifty Index.
About 50 investors participated in the transaction. Most of the buyers were long-only investors, with a skew towards domestic institutions, but some hedge funds also came into the deal, the source said. The deal was about 1.4 times covered, he said.
Citi was the sole bookrunner for the deal.
Cairn India, which is listed on both the Bombay Stock Exchange and the National Stock Exchange, has interests in a total of 11 oil and gas blocks in India and Sri Lanka and is the largest private-sector crude oil producer in India. After the transaction, Cairn Energy’s stake in the company will be reduced to 18.3% from 21.8%, according to the term sheet.
Cairn Energy is an independent oil and gas exploration and development company, and through its subsidiaries it has assets in Albania, Greenland, Nepal, Norway, Spain and the UK, according to its website. The 22% that it owned in Cairn India before this transaction had the potential to account for more than 30% of India’s oil production, it says.
Cairn Energy said in a statement on Friday that the proceeds will help fund its stated strategy, which is to expand its portfolio by adding lower risk, near-term exploration, appraisal and development assets to complement its transformational frontier exploration in Greenland and the Mediterranean, resulting in a balanced overall business.
The additional cash will also provide it with greater operational flexibility. Just last month, the company said it will bid for Nautical Petroleum to help expand its existing portfolio in northwest Europe.
And in May it completed its $453 million acquisition of Norwegian company Agora Oil & Gas, a move that it said will provide a platform to build in the UK and Norwegian North Seas.
The latest share sale comes after it sold 40% of Cairn India in two tranches to natural resources company Vedanta Resources last year for a total of $5.5 billion. Vedanta, together with its subsidiary Sesa Goa, also bought shares previously held by Malaysia’s Petronas and made an open offer to Cairn India’s minority shareholders. When the multi-legged acquisition closed in December last year, the Vedanta group owned a combined 58.5% of Cairn India.
Cairn Energy’s shareholders authorised the board to dispose of all or part of the company’s residual interest in Cairn India at the company’s annual general meeting on May 17, and hence this deal didn’t come as a surprise to the market.
Also last week, HSBC raised $423 million from the sale of its entire holdings in India’s Axis Bank and Yes Bank through two concurrent block trades. Goldman Sachs and HSBC were joint bookrunners for the two blocks.
