Petronas will receive US$2 billion (RM6 billion) cash from the divestment of its 14.9% stake in Cairn India Ltd, which is involved in crude oil production in India.
It is understood that Petronas would realise a gain of US$1 billion from the divestment as the national oil company invested about US$1 billion in the company’s IPO at 160 rupees per share in 2006.
A source familiar with the divestment said Petronas’ stake was sold at 331 rupees (RM22.50) a share, a 1.53% discount to its Monday closing price of 336.15 rupees. Bank of America-Merrill Lynch was the sole adviser and book runner for the deal.
“It makes sense for Petronas to divest its stake in Cairn India after seeing its investment double from US$1 billion. There has been a lot of talk as well of Cairn India being privatised and that is perhaps why Petronas was looking to exit the company,” the source told The Edge Financial Daily.
The share sale is seen as being in line with Petronas’ strategy to hive off non-strategic or non-performing assets abroad.
As at Dec 31, 2010, Petronas’ cash balance was RM103 billion.
Cairn is listed on the Bombay Stock Exchange. The company operates India’s largest onshore oil field in Mangala in the desert state of Rajasthan in northwest India.
It holds 10 production-sharing contracts with the Indian government and other exploration companies. It also owns oil blocks in Sri Lanka.
In August last year, UK-listed Vedanta Resources Ltd, controlled by billionaire Anil Agarwal, made a general offer of 355 rupees (RM24.29) per share for all Cairn India shares subsequent to its proposed purchase of a 40% to 51% stake in the oil driller from Cairn Energy plc.
Earlier this month, the deal came to a standstill when the Indian cabinet referred the deal to a ministerial panel for a decision.
The issue is considered sensitive in India as Cairn India is not required to make royalty payments like its partner Oil and Natural Gas Corp Ltd (ONGC), which pays 20% of the sale price of its oil to the government.
The hiccup by the Indian cabinet prompted some investment analysts to downgrade Cairn India’s stock.
