In India, Vedanta Buys into Cairn Energy - Aug, 2010

The deal between Vedanta and Cairn Energy, is extremely fascinating on several counts. The deal, for sure, is a huge game changer in the oil industry both in India and globally. The deal may become the benchmark of the valuation for the oil assets for the future deals. The key rationale or drive for Vedanta in this deal could be to expand the empire from mines, minerals into oil assets. That means Vedanta wants to take bet into oil arena. But, they don't want to make a blind bet. That's why, they have chosen to buy Cairn Energy, as they have the Rajasthan oil blocks with "proven" oil reserves. So, Vedanta must have thought this is a best way of getting into oil business, instead of bidding for oil fields on their own. Its extremely amazing to see the way Anil Aggarwal has progressed himself from being a small mineral trader to a behemoth of mines, minerals and now oil assets. If this successfully completes, Vedanta and Anil Aggarwal will surely assume a status of "strong reckoning force" in the global business empires. The group will become a strong force in the "deadly combo" business of mines, minerals and oil. The timing of the transaction may be having genesis in the recent recommendations of amendments in Takeover guidelines. The recent recommendations in the Takeover Code to increase the open offer size to 100%, must have forced Vedanta to announce this transaction before these recommendations become guidelines. If these recommendations would have become guidelines, the Vedanta would have been forced to pay about US$ 16-18 Bn. Hence, Vedanta must have been forced to do the transaction now.