London-listed Vedanta Resources has agreed to acquire a majority stake in energy explorer Cairn India for up to $9.6 billion in cash.
'The proposed acquisition significantly enhances Vedanta's position as a natural resources champion in India,' Vedanta's tycoon owner Anil Agarwal said.
Cairn India is India's fourth-largest oil and gas company, thanks to a massive energy find in the western Indian desert state of Rajasthan.
'Cairn India's Rajasthan asset is world class in terms of scale and cost, delivering strong and growing cash flow,' Agarwal said. 'The company has a proven management team and very significant further resource potential. Cairn India will benefit from Vedanta's track record of acquiring and growing world class companies, especially in India,' he added.
Vedanta - which has iron ore, zinc and copper mines - follows the world's biggest miner BHP Billiton in acquiring oil assets. Vedanta said it would acquire 51-60% of Cairn India for between $8.5 and $9.6 billion.
Scottish exploration group Cairn Energy, which holds 62.4% of Cairn India, said the sale would allow it to return cash to shareholders and provide it with funds to push on with its drilling programme in Greenland.
Cairn India owns a 70% stake in the Mangala oil field in the prolific Rajasthan block where the rest is held by state-owned Oil and Natural Gas Corp. Cairn India estimates the Mangala field can produce up to 150,000 barrels of crude oil per day. The entire Rajasthan block is estimated to have a potential of up to 240,000 barrels per day.
Cairn Energy began to pump crude from the vast reserves in Rajasthan in August last year. It bought the field in 2002 from Anglo-Dutch giant Shell, which had concluded it contained no major reserves. Two years later, Cairn struck oil.