Cairn India ProposedFlotation
Cairn Energy PLC
01 November 2006
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, OR INTO, THE UNITED STATES,
CANADA, AUSTRALIA OR JAPAN
EMBARGOED FOR RELEASE AT 0700
1 November 2006
PART I
CAIRN ENERGY PLC ('Cairn')
Proposed flotation of Cairn India Limited ('Cairn India'), approval of new share
incentive arrangements and notice of extraordinary general meeting
• Flotation of Cairn India creates two separate world class businesses in
South Asia
• Group to hold approximately 69.5 per cent. of Cairn India immediately
following the Flotation(1)
• Price to be determined following a 'book building' process to set the
Offer Price for Cairn India's shares in December 2006
• Illustrative gross proceeds of US$1.8 billion based on the value for the
Indian Business implied by the Cairn Energy PLC Closing Share Price(2)(3)
• Part of proceeds to be used to fund the Group's ongoing business;
balance to be returned to shareholders - further details to be provided
following Flotation
• New share incentive arrangements proposed for Cairn India and Cairn
• Current trading in line with interim results statement
• Circular in connection with proposed flotation of Cairn India posted to
Shareholders today
• EGM to be held on 17 November 2006
Sir Bill Gammell, Chief Executive said:
'I am delighted to report today that we have posted our Circular to
shareholders. This is an important milestone in our progress towards achieving a
flotation of the Indian business at the end of this year. The roadshow for the
pre-flotation private placing has now commenced. I firmly believe that a
successful flotation is in the best strategic interests of the Cairn India
business and will provide an opportunity to realise value for shareholders.'
Introduction
The flotation of Cairn's Indian business on the Bombay Stock Exchange and the
National Stock Exchange of India is currently scheduled to take place in
December 2006. In the meantime, due to the potential significance to the Company
of the proposed flotation (and associated sale), the Company is seeking prior
approval of Shareholders at an extraordinary general meeting.
Benefits of the flotation
The size of the main discoveries and the ongoing development in Rajasthan have
significantly changed the nature of the Group's business in India, both in terms
of value and scale and the Board believes it is now appropriate to realise part
of the value of this business for Shareholders.
Whilst the Group's Indian business is well-placed to take advantage of the
potential growth opportunities in India, the Board believes that the proposed
flotation should further enhance that business by:
• providing it with additional capital;
• increasing local autonomy and management focus;
• raising its local profile in order to position it more effectively; and
• creating a discrete, focused investment opportunity for investors.
Following the proposed flotation, there will be two arms to the Group's
business: a majority shareholding in the listed Indian business and an
exploration and production business (owned and operated by a wholly-owned
subsidiary of the Company, Capricorn).
Capricorn will focus initially on the Group's remaining assets in Bangladesh,
Nepal and Northern India, but will additionally consider new material growth
opportunities. The scope of Capricorn's activities in India (including Indian
territorial waters) will be the subject of the non-compete agreement entered
into with Cairn India.
The Board believes that the proposed flotation of the Group's Indian business
presents the opportunity to create two separate world-class businesses in South
Asia whilst at the same time realising value for Shareholders through the sale
of part of the Company's interest in its Indian business.
Consideration
The Flotation, as currently proposed, involves two principal steps. Firstly a
new company, Cairn India, will be floated on the Bombay Stock Exchange and on
the National Stock Exchange. Secondly, in conjunction with the Flotation, the
Group will dispose of its Indian Business to Cairn India in exchange for cash
and the issue to the Group of a majority shareholding in Cairn India.
The Offer Price set for Cairn India's Shares in the Flotation will determine the
value of the Indian Business for the purpose of the Disposal. The Offer Price
(and accordingly the amount of money to be raised in the Flotation) will be
finalised following a 'book building' process. It is expected that the Offer
Price will be announced by the Company in December 2006.
The final amount of the consideration due to the Group from the Disposal will be
determined once the Offer Price has been determined and will be a mix of cash
and Cairn India Shares. The Board intends to set the lower end of the price
range for the 'book building' process at a price per Cairn India Share (the
Offer Price Range Floor) that places an expected minimum pre-Flotation valuation
on the Indian Business of approximately Rs 235.5 billion(4) (£2.7 billion),
which, in the Board's view, is the value for the Indian Business implied by the
Cairn Energy PLC Closing Share Price.
Accordingly, by way of illustration, if the Offer Price were to be set at an
amount equal to the Offer Price Range Floor and Cairn India was to retain funds
amounting to Rs 27.1 billion (£316.3 million) from the expected gross proceeds
of the Flotation of US$1.8 billion (or approximately US$1.9 billion in the event
that the Over Allotment Option is exercised in full) to fund its ongoing working
capital requirements, then it is expected that the gross cash proceeds of the
Disposal which would be received by the Group would be approximately Rs 53
billion (£618.0 million) (or approximately Rs 59 billion (£688.4 million) in the
event that the Over Allotment Option is exercised in full) and that the Group
would hold approximately 69.5 per cent. of the issued share capital of Cairn
India immediately following the Flotation (or approximately 67.2 per cent. in
the event that the Over Allotment Option is exercised in full).
The Offer Price and the proceeds of the Flotation to be retained by Cairn India
to fund its ongoing working capital requirements have not yet been determined
and accordingly the gross cash proceeds of the Disposal and the proportion of
the share capital of Cairn India to be issued to the Group may be different from
this illustrative example.
Use of proceeds
If the Flotation and the Disposal proceed, the Board intends to utilise part of
the net cash proceeds to fund the Group's ongoing business, with the balance
being returned to Shareholders. The Board intends to return this cash to
Shareholders in a manner which will seek to be as tax efficient as practical and
seeks to meet the differing tax and accounting requirements of Shareholders.
Further details on the proposed return of cash will be communicated to
Shareholders after the Flotation becomes effective.
Shareholders should note that the proposed return of cash is not guaranteed and
that the amount and the timing of any cash return and the means by which it is
to be achieved have not yet been determined.
Strategy of the Group following the Disposal and the Flotation
Following the Disposal and the Flotation, the Company will own a majority
shareholding in Cairn India. The Company will also continue (through Capricorn)
to undertake oil and gas exploration and production.
If the Disposal and the Flotation proceed, the Group's principal focus will be
to continue to pursue, through Capricorn, its proven strategy of building
Shareholder value from strategic positions in what the Board believes to be high
potential exploration acreage. In addition, the Company will continue to look at
ways in which it can seek to maximise value for Shareholders from the Group's
remaining majority shareholding in Cairn India including, subject to the
restrictions imposed by Indian regulations and law, through the sale of its
Cairn India Shares.
In addition, the Board will continue to review and consider strategies and
structures to maximise Shareholder value going forward, which may include asset
realisation, asset related capital structures or direct Shareholder
participation in the two arms of the Group's business.
Circular
The circular to shareholders in connection with the Flotation and Disposal and
the new share incentive arrangements will be posted to Shareholders today. The
EGM seeking shareholder approval for these proposals will be held on 17 November
2006.
The circular will shortly be available to the public for inspection at the UK
Listing Authority's Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel No. +44 (0)20 7066 1000, during normal business hours on any weekday
(Saturdays, Sundays and public holidays excepted).
The circular will also shortly be available on the Investor Relations section of
Cairn's website at www.cairn-energy.plc.uk.
Indicative Timetable
Circular posted to shareholders 1 November 2006
Extraordinary General Meeting 17 November 2006
Cairn India Offering Document
('Red Herring Prospectus') filed post EGM in November 2006
Cairn India Initial Public Offer December 2006
This summary should be read in conjunction with Part II of this announcement,
which includes further details regarding the Proposed Flotation of Cairn India
Limited and the proposed new share incentive arrangements.
Enquiries to:
Analysts/Investors
Bill Gammell Chief Executive Tel: 0131 475 3000
Kevin Hart Finance Director
Mike Watts Exploration Director
Media
David Nisbet, Head of Group Communications
Brunswick Group LLP:
Patrick Handley, Mark Antelme Tel: 0207 404 5959
Cautionary note regarding forward-looking statements
This announcement includes certain forward-looking statements with respect to
the financial condition, results of operations and business of the Group and of
the Cairn India Group and certain plans and objectives of the Board. These
forward-looking statements can be identified by the fact that they do not relate
to any historical or current facts. Forward-looking statements often use words
such as ''proposed'', ''anticipate'', ''expect'', ''estimate'', ''intend'',
''plan'', ''believe'', ''will'', ''may'', ''should'', ''would'', ''could'' or
other words with a similar meaning. These statements are based on assumptions
and assessments made by the Board in light of its experience and its perception
of historical trends, current conditions, expected future developments and other
factors it believes appropriate. By their nature, forward-looking statements
involve risk and uncertainty and there are a number of factors that could cause
actual results and developments to differ materially from those expressed in, or
implied by, such forward-looking statements.
Actual results may differ materially from those suggested by the forward-looking
statements due to risks or uncertainties associated with the Group's and the
Cairn India Group's expectations with respect to, but not limited to: (i)
regulatory changes pertaining to the oil and gas industries in India, Nepal and
Bangladesh and their respective abilities to respond to those changes and to
implement successfully their respective strategies; (ii) their growth and
expansion; (iii) technological changes; (iv) exposures to market risks; (v)
general economic and political conditions in India, Nepal and Bangladesh, which
have an impact on their respective business activities or investments; (vi) the
monetary and fiscal policies of India, Nepal and Bangladesh; (vii) inflation,
deflation, unanticipated turbulence of the financial markets in India, the
United Kingdom and globally; (viii) changes in domestic laws, regulations and
taxes; and (ix) changes in competition in their industry.
For further discussions of factors that could cause the Group's or the Cairn
India Group's actual results to differ, please see the section entitled ''Risk
Factors'' set out in Part IX of the Circular. By their nature, certain market
risk disclosures are only estimates and could be materially different from what
actually occurs in the future. As a result, actual future gains or losses could
materially differ from those that have been estimated.
These forward-looking statements speak only as at the date of this announcement.
Save as required by the requirements of the Financial Services Authority or the
London Stock Exchange plc or otherwise arising as a matter of law, the Company
expressly disclaims any obligation or undertaking to disseminate after
publication of this announcement any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Group's or the Cairn
India Group's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
Cairn India Limited ('Cairn India') proposes to undertake a public issue in
India and has filed a Draft Red Herring Prospectus with the Securities and
Exchange Board of India. This announcement is not an offer for sale, or a
solicitation of offers to purchase, the shares in Cairn India to be offered in
the offering (the 'Shares') in any jurisdiction. No action will be taken to
permit the Shares to be sold in a public offer in any jurisdiction outside
India. In particular, no offer to the public will be made in any Member State of
the European Economic Area or in the United States. The Shares have not been and
will not be registered under the US Securities Act of 1933, as amended. This
announcement and the information contained herein are not for publication,
distribution or release in, or into, the United States, Canada, Australia or
Japan.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, OR INTO, THE UNITED STATES,
CANADA, AUSTRALIA OR JAPAN
EMBARGOED FOR RELEASE AT 0700
1 November 2006
PART II
CAIRN ENERGY PLC ('Cairn')
Proposed flotation of Cairn India Limited ('Cairn India'), approval of new share
incentive arrangements and notice of extraordinary general meeting
1. Introduction
On 14 March 2006, the Company announced that, having regard to the potential
growth opportunities available in India, it intended to examine a flotation of
its Indian business on the Bombay Stock Exchange and the National Stock
Exchange, as a means both of increasing the autonomy of that business and of
realising value for Shareholders.
As announced by the Company on 5 September 2006, significant progress has been
made towards this objective and preparations are on track for a flotation, which
is currently scheduled to take place in December 2006. The Board will make the
final decision as to whether or not to proceed with the flotation (and, if so,
on what terms) in due course (having regard to, amongst other things, prevailing
market conditions).
In the meantime, due to the potential significance to the Company of the
proposed flotation (and associated sale), the Company is seeking prior approval
of Shareholders at an extraordinary general meeting. The purpose of the Circular
is to: (i) explain the background to and reasons for the proposed flotation (and
associated sale); (ii) explain why the Board considers the proposed flotation
(and associated sale) to be in the best interests of Shareholders as a whole;
(iii) convene an extraordinary general meeting of the Company; (iv) seek
Shareholder approval for the flotation of the Group's Indian business and the
sale by the Group of part of that business; (v) seek Shareholder approval for
certain new share incentive arrangements that the Board recommends be put in
place in light of the proposed flotation (and associated sale); and (vi)
recommend that Shareholders vote in favour of the resolutions to be proposed at
the extraordinary general meeting.
The proposed flotation would result in the sale of a minority interest in the
Group's Indian business and would leave the Group with two distinct arms: a
majority shareholding in a listed Indian business and an exploration and
production business focused principally on the Group's remaining assets in
Bangladesh, Nepal and Northern India. If the proposed flotation (and associated
sale) proceeds, the Board intends to utilise part of the net cash proceeds to
fund the Group's ongoing business and to return the balance to Shareholders.
The Board believes that the proposed flotation of the Group's Indian business
presents the opportunity to create two separate world-class businesses in South
Asia whilst at the same time realising value for Shareholders through the sale
of part of the Company's interest in its Indian business.
2. Background to and reasons for the proposed flotation
The Company's long-stated objective has been to add value for Shareholders
through exploration and to realise such value at the appropriate time. The size
of the main discoveries and the ongoing development in Rajasthan have
significantly changed the nature of the Group's business in India, both in terms
of value and scale and the Board believes it is now appropriate to realise part
of the value of this business for Shareholders. Whilst the Group's Indian
business is well-placed to take advantage of the potential growth opportunities
in India, the Board believes that the proposed flotation should further enhance
that business by:
• providing it with additional capital to finance its ongoing oil and gas
exploration, production and development business;
• increasing local autonomy and management focus to assist the Indian business
to: (i) manage more effectively its own resources; (ii) pursue strategies which
are appropriate to its market; and (iii) respond more quickly to opportunities
within its market;
• raising its local profile in order to position it more effectively to: (i)
interact with its growing number of stakeholders in India (including the Indian
Government); (ii) benefit from potential growth opportunities in India; and
(iii) attract, retain and motivate appropriately qualified personnel in India;
and
• creating a discrete, focused investment opportunity for investors, which would
also enable the Indian business to access the local capital markets if it
required to do so in the future.
Following the proposed flotation, there will be two arms to the Group's
business: a majority shareholding in the listed Indian business and an
exploration and production business (owned and operated by a wholly-owned
subsidiary of the Company, Capricorn). Capricorn will focus initially on the
Group's remaining assets in Bangladesh, Nepal and Northern India, but will
additionally consider new material growth opportunities, where the Group can
continue to execute its proven strategy of seeking to build shareholder value
through exploration (without also having to manage directly the next stage of
the development of the Indian business). This strategy may involve significant
expenditure on high risk exploration. The scope of Capricorn's activities in
India (including Indian territorial waters) will be the subject of the
non-compete agreement entered into with Cairn India. If the proposed flotation
(and associated sale) proceeds, the Board intends to utilise part of the net
cash proceeds to fund the Group's ongoing business and to return the balance to
Shareholders.
3. How is the Flotation to be effected?
The Flotation, as currently proposed, involves two principal steps. Firstly a
new company, Cairn India, will be floated on the Bombay Stock Exchange and on
the National Stock Exchange. Secondly, in conjunction with the Flotation, the
Group will dispose of its Indian Business to Cairn India in exchange for cash
and the issue to the Group of a majority shareholding in Cairn India.
The proposed transaction structure has not yet been approved by the appropriate
Indian regulatory authorities, including RBI and SEBI. If these approvals are
not obtained, then the Disposal and the Flotation may not proceed, may require
to be restructured or may be delayed. Assuming that the Flotation proceeds on
the basis of the proposed structure and within the planned timetable,
Shareholders should note the following principal points as regards each of the
two steps.
The Flotation
The Flotation will comprise underwritten global institutional and Indian retail
offers of Cairn India Shares and the admission of those shares to trading on the
Exchanges. The Flotation will be preceded by a pre-Flotation private placing of
Cairn India Shares that commenced during October 2006 with institutional and
other investors. Its principal purpose will be to provide the Company and the
Underwriters with an indication of the likely valuation that the Indian Business
might achieve on Flotation, whilst also seeking to establish a core group of
investors to increase the marketability of the Flotation. The pre-Flotation
private placing will not be underwritten.
The global and retail offers will be underwritten. Both the global institutional
and Indian retail offers will be ''book built'', with prospective investors
being invited (following receipt of a price-range prospectus) to submit bids to
the Underwriters for a specified number of Cairn India Shares at various
specified prices. It is currently proposed that the price-range prospectus be
filed with the Registrar of Companies in Mumbai on or around 22 November 2006,
with the last date for submitting bids in the ''book build'' being on or around
15 December 2006. Following the ''book building'' process, the Offer Price (and
accordingly the amount of money to be raised in the Flotation) will be
finalised. This will determine the value of the Indian Business for the purpose
of the Disposal. The final determination of the Offer Price will be made by the
respective boards of Cairn India and the Company, in consultation with the
Underwriters, based on, amongst other things, the nature and level of demand for
Cairn India Shares and the objective of establishing an orderly after-market in
the Cairn India Shares on the Exchanges. It is expected that the Offer Price
will be announced by the Company in December 2006.
In addition, in connection with the Flotation, Cairn India may exercise the Over
Allotment Option through Merrill Lynch. Merrill Lynch may use the over-allotment
to effect transactions with a view to supporting the market price of Cairn India
Shares during a period of up to 30 days following the Flotation. In connection
with the Over Allotment Option, Cairn UK Holdings (the subsidiary that will sell
the Group's outstanding interest in the Indian Business pursuant to the
Disposal) has agreed to lend up to such number of Cairn India Shares as
represents not more than 15 per cent. of the Cairn India Shares issued pursuant
to the Flotation for the purpose of making such over-allotment. At the end of
the period of price stabilisation, Cairn India will issue such number of Cairn
India Shares as is required to return to Cairn UK Holdings any shares which were
previously loaned.
The Disposal
Pursuant to the Disposal, Cairn UK Holdings will sell its outstanding interest
in Cairn India Holdings (the subsidiary through which the Group holds its
interests in the Indian Business) to Cairn India (the company that is seeking a
listing on the Exchanges).
The final amount of the consideration due to Cairn UK Holdings from Cairn India
for Cairn India Holdings, will be determined once a value has been set for the
Indian Business in the Flotation and will be a mix of cash and Cairn India
Shares. The Board intends to set the lower end of the price range in the global
and retail offers at a price per Cairn India Share (the Offer Price Range Floor)
that places an expected minimum pre-Flotation valuation on the Indian Business
of approximately Rs 235.5 billion(5) (£2.7 billion), which, in the Board's view,
is the value for the Indian Business implied by the Cairn Energy PLC Closing
Share Price.
Accordingly, by way of illustration, if the Offer Price were to be set at an
amount equal to the Offer Price Range Floor and Cairn India was to retain funds
amounting to Rs 27.1 billion (£316.3 million) from the expected gross proceeds
of the Flotation of US$1.8 billion (or approximately US$1.9 billion in the event
that the Over Allotment Option is exercised in full) to fund its ongoing working
capital requirements, then it is expected that the gross cash proceeds of the
Disposal, which would be received by the Company or Cairn UK Holdings, would be
approximately Rs 53 billion (£618.0 million) (or approximately Rs 59 billion
(£688.4 million) in the event that the Over Allotment Option is exercised in
full) and that the Group would hold approximately 69.5 per cent. of the issued
share capital of Cairn India immediately following the Flotation (or
approximately 67.2 per cent. in the event that the Over Allotment Option is
exercised in full). The Offer Price and the proceeds of the Flotation to be
retained by Cairn India to fund its ongoing working capital requirements have
not yet been determined and accordingly the gross cash proceeds of the Disposal
and the proportion of the share capital of Cairn India to be issued to the Group
may be different from this illustrative example.
Shareholders should be aware that the Disposal and the Flotation may proceed
notwithstanding the fact that the Offer Price (which will determine the value of
the consideration due to the Group in respect of the Disposal) may be set below
the Offer Price Range Floor but only if to do so is considered by the Board to
be reasonable and in the best interests of Shareholders as a whole. The Board is
seeking Shareholder approval to proceed with the Disposal and the Flotation at
such Offer Price as would satisfy these criteria, which may or may not be above
the Offer Price Range Floor. If the Offer Price is set below the Offer Price
Range Floor, then the gross cash proceeds of the Disposal will be less and
accordingly the amount of cash available for return to Shareholders will also be
less.
If the Flotation becomes effective, Cairn India Shares will be admitted to
trading on the Exchanges. Shareholders should note that the Cairn India Shares
held by the Group will be subject to Indian regulatory and legal transfer
restrictions, such that it is expected that:
• in respect of 20 per cent. of the post-Flotation issued share capital of Cairn
India, no disposal by the Group will be permitted during the period of three
years commencing on the date of allotment of Cairn India Shares in the
Flotation; and
• in respect of the balance of the Group's shareholding in Cairn India held
immediately prior to the Flotation, no disposal by the Group will be permitted
during the period of 12 months commencing on the date of allotment of Cairn
India Shares in the Flotation.
Use of proceeds
The Disposal is subject to Shareholder approval and, if it proceeds, the Board
intends to utilise part of the net cash proceeds to fund the Group's ongoing
business, with the balance being returned to Shareholders. The Board intends to
return this cash to Shareholders in a manner which will seek to be as tax
efficient as practical and seeks to meet the differing tax and accounting
requirements of Shareholders. Following the receipt of the cash proceeds by the
Company and pending their return to Shareholders, the monies will be held in an
interest bearing deposit account. Further details on the proposed return of cash
will be communicated to Shareholders after the Flotation becomes effective.
Shareholders should note that the proposed return of cash is not guaranteed and
that the amount and the timing of any cash return and the means by which it is
to be achieved have not yet been determined.
Following the completion of the Disposal, the Indian Business will be owned by
Cairn India and the remaining exploration and production business of the Group
will be held through Capricorn. Further information on the Indian Business and
on the remaining business of the Group is set out below.
4. Overview of Cairn India and the Cairn India Holdings Group
Corporate structure and management
In preparation for the Disposal and the Flotation, the Company has created a
structure to enable the Indian Business to operate autonomously. New office
headquarters for Cairn India have been established in the growing commercial
area of Gurgaon on the outskirts of New Delhi, providing good transportation
links to Rajasthan and access to key Indian stakeholders (including the Indian
Government).
An executive management team with substantial experience in the oil and gas
industry, both internationally and in India, backed by a highly skilled and
experienced board, has been assembled for Cairn India. The Cairn India board of
directors (whose brief biographies are set out in Appendix I of this
announcement) comprises:
Name Function
Sir Bill Gammell Non-Executive Chairman
Norman Murray Non-Executive Deputy Chairman
Rahul Dhir Chief Executive Officer
Lawrence Smyth Chief Operating Officer
Jann Brown Acting Chief Financial Officer
Hamish Grossart Non-Executive Director
Naresh Chandra Independent Non-Executive Director
Aman Mehta Independent Non-Executive Director
Dr Omkar Goswami Independent Non-Executive Director
In addition, under the arrangements for the separation of the Indian Business
from the rest of the Group, certain employees who have been involved in the
acquisition or development of the Indian Business will transfer to Cairn India.
At 30 June 2006 Cairn India had approximately 425 employees. In Rajasthan, a
development team is in place and staffed with industry experts possessing a
wealth of experience in large-scale international development projects. The
Rajasthan development team currently consists of approximately 50 members of
staff. To carry out Cairn India's operations in the Rajasthan Block, Cairn India
expects to reach a peak employment of approximately 140 people who will provide
direct support for its operations in Rajasthan towards the end of 2007. In
addition, in areas where the rest of the Group and Cairn India believe it is
economical to do so, Cairn India has contracted with certain other members of
the Group to receive administrative and operational support from those Group
members for a transitional period of 6 months (or longer for certain legal and
tax services) following the Flotation.
Accordingly, the Board considers that the framework and resource base are
already in place to facilitate the autonomous operation of the Indian Business
following the Disposal and the Flotation.
Assets and summary financial information
In addition to creating an appropriate corporate structure, the Group has been
reorganised such that the Cairn India Holdings Group holds all of the oil and
gas interests which are to be acquired by Cairn India. These include:
• operated interests in producing fields at Ravva in Block PKGM-1 in the
Krishna-Godavari Basin offshore eastern India (a 22.5 per cent. working
interest) and at Lakshmi and Gauri in Block CB/OS-2 in the Cambay Basin offshore
western India (a 40 per cent. working interest). Crude oil and natural gas
production from Ravva commenced in 1993. Production of natural gas commenced
from Lakshmi in 2002 and from Gauri in 2004. Production of commingled crude oil
from Gauri commenced in 2005;
• a 70 per cent. working interest in a development area of 1,858 km2 in the
Rajasthan Block (awarded until 2020), which includes the Mangala, Aishwariya,
Saraswati and Raageshwari fields;
• a 100 per cent. participating interest in an appraisal area of 2,885 km2 in
the Rajasthan Block, which was awarded for an 18 month period in June 2005
(expiring on 14 November 2006). The licence in respect of this area is the
subject of a six month extension application. The Cairn India Holdings Group
will however retain its interests in any discoveries made in this area on expiry
of the licence including the existing Bhagyam and Shakti discoveries; and
• equity interests in ten blocks where there is currently no production or
development but which are in various stages of exploration. The three main
basins where the Indian Business is currently actively involved in exploring
include the Cambay, Krishna-Godavari and Himalayan Foreland Basins.
As at 30 June 2006, the estimated gross proved and probable reserves
attributable to the fields in production or under development in which the Cairn
India Holdings Group has an interest were 754 mmboe and its estimated net
working interest in these reserves was 472 mmboe.
The Cairn India Holdings Group has also applied (in certain cases, jointly with
members of the Capricorn Group) for a number of blocks in the recent NELP VI
licensing round (which closed on 15 September 2006) and a separate update will
be issued to Shareholders in due course once the results of those applications
are known. The Company believes that bidding in that round may have been very
competitive.
As at 30 June 2006, the gross assets of the Cairn India Holdings Group were
approximately $829 million and, in the six months ended 30 June 2006, the
revenue was approximately $121 million and profit attributable to the equity
holders for the period was approximately $52 million. For the twelve months
ended 31 December 2005, the revenue of the Cairn India Holdings Group was
approximately $174 million and profit attributable to the equity holders for the
period was approximately $52 million.
5. Proposed share incentive arrangements for the Cairn India Group
Introduction
In order to seek to align more closely the interests of the executive directors
and employees of Cairn India with the interests of its shareholders (including
Cairn UK Holdings, the subsidiary through which the Company will hold its
majority shareholding in Cairn India following the Disposal and the Flotation),
it is proposed that three new management and employee share incentive
arrangements be put in place. In the course of structuring these arrangements,
the Board consulted with certain major Shareholders.
Cairn India Senior Management Plan
The first of the three new proposed arrangements is the Cairn India Senior
Management Plan. It is proposed that only Rahul Dhir (Cairn India's Chief
Executive Officer) and Lawrence Smyth (Cairn India's Chief Operating Officer)
will be granted options under this plan over 6,714,233 and 1,584,480 Cairn India
Shares respectively as soon as practicable following the EGM. The Cairn India
Shares over which these options will be granted will be worth (at a value per
Cairn India Share calculated by reference to the Offer Price Range Floor)
approximately £11.7 million(6) and £2.7 million respectively. The aggregate
exercise price payable in relation to these options will be in the region of
£2.6 million in the case of Mr Dhir's award and £0.62 million in the case of Mr
Smyth's.
In terms of Mr Dhir's award, vesting will generally occur as follows:
• one-third of the award will vest on the day after the Flotation becomes
effective;
• a further third will vest eighteen months after the date on which the
Flotation becomes effective; and
• conditional on the Flotation becoming effective, the final third will vest on
achieving certain specified production targets relating to the Rajasthan
Development Area.
In the case of Mr Smyth's award, vesting will generally occur as follows:
• one-half will vest on the day after the Flotation becomes effective; and
• conditional on the Flotation becoming effective, the balance of the award will
vest in two equal tranches on achieving certain specified targets relating to
the Rajasthan Development Area.
Any Cairn India Shares acquired on the exercise of these options will generally
be subject to a 12 month lock-in period following the Flotation during which
they cannot be sold.
In Mr Dhir's case, the above award is required to attract a highly sought after
executive from investment banking into an Indian chief executive officer's
position in the oil and gas sector. The Board firmly believes that Mr Dhir has
the right credentials to take on this role and develop Cairn India over the
coming years. He was an outstanding candidate for the post with all the
necessary sector experience so, whilst the above arrangements are unusual, the
Board considers them appropriate in the circumstances.
In Mr Smyth's case, the above award is necessary to ensure the continued
services of this highly experienced individual and to reflect the significance
of his enhanced role within the Cairn India organisation.
It is not expected that any other individuals will receive awards under the
Cairn India Senior Management Plan and no further awards will be granted
pursuant to this arrangement following the Flotation.
Cairn India POP and Cairn India ESOP
In addition, it is also proposed that Cairn India will establish the Cairn India
POP and the Cairn India ESOP.
The Cairn India POP is intended to be used for senior executives, including
executive directors of Cairn India. Under the plan, regular awards over Cairn
India Shares will be made, the vesting of which will generally be dependent on
both continued employment with Cairn India and the extent to which predetermined
performance conditions are met over a specified period of at least three years.
Initially, the performance condition attaching to awards will be based on the
total shareholder return ('TSR') of Cairn India compared to the TSRs of a group
of exploration, production and integrated oil companies. No awards will vest for
below median performance and full vesting will require an upper quartile
ranking. In addition, in order for any awards to vest, the remuneration
committee of Cairn India will need to be satisfied that there has been a
satisfactory and sustained improvement in Cairn India's underlying performance.
The Cairn India ESOP is intended to be used for less senior employees of the
Cairn India Group. Under this plan, selected employees will receive market value
options over Cairn India Shares. These options will generally be exercisable
after three years, subject to the individuals remaining in employment. In
accordance with generally prevailing market practice in India, the ability to
exercise these options will not be subject to satisfying any additional
performance criteria.
If approved by Shareholders, it is intended that the initial awards and options
under the Cairn India POP and the Cairn India ESOP will be granted prior to, and
conditionally upon, the completion of the Flotation. Given the provisions of the
Cairn India Senior Management Plan, it is not intended that Rahul Dhir and
Lawrence Smyth will participate in these initial awards. Following the
Flotation, no further awards or options will be granted until the Cairn India
POP and ESOP have been ratified by Cairn India's shareholders in general
meeting.
Dilution under the Cairn India POP and the Cairn India ESOP will be limited to
88,265,718 Cairn India Shares, being approximately 5 per cent. of the expected
issued share capital of Cairn India immediately following the Flotation
(assuming no exercise of the Over Allotment Option).
Shareholder approval
The adoption of the above plans requires the approval of Shareholders.
6. Overview of the Group following the Disposal and the Flotation
Corporate structure and management
Following the Disposal and the Flotation, the Company will remain headquartered
in Edinburgh, with the interests of the Group that are not the subject of the
Disposal being held by Capricorn, a wholly-owned subsidiary of the Company. The
Board of the Company, which will remain the parent of the Group, will be
substantially the same. The only changes will be that Kevin Hart will resign as
Finance Director of the Company and be replaced by Jann Brown (currently Group
Financial Controller) and that Simon Thomson (currently Group Commercial
Manager) will be appointed as Commercial & Legal Director. It is currently
envisaged that the effective date of Kevin Hart's resignation and of Jann
Brown's and Simon Thomson's appointments will be following the EGM.
Assets
Following the Disposal and the Flotation, the Company will own a majority
shareholding in Cairn India. The Company will also continue (through the
Capricorn Group) to undertake oil and gas exploration and production. The
Capricorn Group's principal interests include:
• an operated interest in the Sangu gas field in Bangladesh (a 75 per cent.
participating interest), which commenced production in June 1998; and
• significant exploration acreage in Bangladesh, Nepal and Northern India.
The Capricorn Group has also applied (jointly with members of the Cairn India
Holdings Group) for a number of blocks in the recent NELP VI licensing round and
a separate update will be issued to Shareholders in due course once the results
of those applications are known. The Company believes that bidding in that round
may have been very competitive.
As at 30 June 2006, the estimated gross proved and probable reserves
attributable to the Sangu gas field in Bangladesh, the Capricorn Group's only
producing asset, were 58.7 mmboe and its estimated net working interest in these
reserves was 44 mmboe.
Future strategy
If the Disposal and the Flotation proceed, the Group's principal focus will be
to continue to pursue, through the expertise within the Capricorn Group, its
proven strategy of building Shareholder value from strategic positions in what
the Board believes to be high potential exploration acreage. In addition, the
Company will continue to look at ways in which it can seek to maximise value for
Shareholders from the Group's remaining majority shareholding in Cairn India
including, subject to the restrictions imposed by Indian regulations and law,
through the sale of its Cairn India Shares.
In addition, the Board will continue to review and consider strategies and
structures to maximise Shareholder value going forward, which may include asset
realisation, asset related capital structures or direct Shareholder
participation in the two arms of the Group's business.
7. Proposed share incentive arrangements for the Group
Introduction
The Board recognises that, following the Disposal and the Flotation, the
Company's existing share incentive plans will no longer be appropriate.
Accordingly, it is proposed that, subject to the Flotation becoming effective,
the New Group LTIP and New Group Share Option Plan be established. These
arrangements reflect the fact that, on an ongoing basis, the Company will have
two distinct arms to its business (namely, a shareholding in Cairn India and the
activities of the Capricorn Group) and therefore will seek to incentivise
management and employees of the Group in relation to the performance of the
arm(s) which they can affect. This will be achieved through the granting of
awards and options over notional 'units' in Capricorn and Cairn India, the value
and vesting of which will depend on the success of the relevant part of the
business.
It is acknowledged and accepted by the Board that the way in which these
arrangements have been structured is unusual. However, as noted above, they are
intended to reflect the specific structure of the Group and the special
circumstances that will exist following completion of the Disposal and the
Flotation. In the course of formulating these new plans, the Company consulted
with certain major Shareholders.
New Group LTIP
Under the New Group LTIP, senior executives (including executive directors) will
receive awards of units on a regular basis, the vesting of which will generally
be dependent on both continued employment of the individual with the Group and
the extent to which predetermined performance conditions are met over a
specified performance period of at least three years. Whilst most executives
will be concentrating on Capricorn, the Company's remuneration committee feels
that the executive directors should all have a portion of their awards based on
Cairn India's performance, thereby ensuring that their interests are
appropriately aligned with those of Shareholders. It is, therefore, intended
that Sir Bill Gammell will receive 50 per cent. of his units in Capricorn and 50
per cent. in Cairn India. The other directors will receive variable weightings,
depending on their role, but no more than 75 per cent. will apply to either type
of unit.
The performance conditions for the initial awards under the New Group LTIP will
be based on the notional total shareholder return ('TSR') of a Capricorn or
Cairn India unit, compared to a group of similarly sized oil and gas exploration
companies (in the case of Capricorn units) or a selection of mature oil and gas
companies (in the case of Cairn India units). No part of an award will vest for
below median performance and full vesting will require at least an upper decile
ranking. To ensure that the New Group LTIP adequately encourages and rewards
exceptional performance, where a TSR ranking of upper decile level or above is
achieved, executives can receive further awards through the application of a
'multiplier' that is linked to the absolute TSR actually achieved.
Irrespective of the TSR outcome, no part of an award will vest unless the
Company's remuneration committee is satisfied that there has been overall
satisfactory and sustained improvement in the performance of the Company.
New Group Share Option Plan
Under the proposed New Group Share Option Plan (which is intended for less
senior employees who do not participate in the New Group LTIP and in any event
will not be used for executive directors), participants will be granted options
over Capricorn units only, with a notional 'exercise price' generally equal to
the Capricorn unit price around the time of grant. These awards will normally
vest after three years depending on remaining in employment and upon the
satisfaction of a performance criterion based on the growth in the value of a
Capricorn unit. In addition, no part of an option will vest unless the TSR of a
Capricorn unit is sufficient to place it at or above median compared to the same
comparator group chosen for the purposes of the New Group LTIP.
Dilution and implementation
It is intended that any gains made on the vesting of awards under the New Group
LTIP and New Group Share Option Plan will be settled in the form of Shares,
although the remuneration committee of the Company will be able to settle the
awards in cash if appropriate or necessary. Under the New Group LTIP, only 50
per cent. of the Shares to which a participant is entitled will be released on
vesting, with the receipt of the balance generally being deferred for a further
period of one year.
Dilution under all of the Company's share schemes (i.e. the New Group Schemes,
the Cairn LTIP and the Cairn Share Schemes) will be limited to 10 per cent. of
the Company's issued share capital from time to time in any ten-year period,
with an inner 5 per cent. limit applying to selective plans.
It is intended that the initial awards under the New Group LTIP and New Group
Share Option Plan will be made as soon as reasonably practicable after the
Flotation. Awards and options which have already been granted under the existing
Cairn LTIP and Cairn Share Schemes will not be altered or affected by these
proposals, but no further grants will be made under those arrangements once the
proposed new plans have been approved by Shareholders.
Shareholder approval
The adoption of the New Group LTIP and the New Group Share Option Plan requires
the approval of Shareholders.
8. Principal arrangements in respect of the ongoing relationship between the
Cairn India Group and the rest of the Group
Following the Flotation, the Cairn India Group will be a stand-alone business,
which will operate independently from the rest of the Group. The Group (through
Cairn UK Holdings) will, however, continue to hold a majority shareholding in
Cairn India and both businesses will continue to operate in South Asia. That
being so, the Company and Cairn India have entered into a number of agreements
to manage certain aspects of their ongoing relationship. These include:
• a relationship agreement relating to the management of certain aspects of the
corporate relationship between the Company, Cairn UK Holdings (the subsidiary of
the Company through which it will hold a majority shareholding in Cairn India
following the Disposal and the Flotation) and Cairn India, including access to
financial information relating to Cairn India and the adoption by Cairn India of
certain standards of risk management, corporate governance and corporate social
responsibility policies and procedures. The relationship agreement also states
that the parties intend to seek to ensure that all dealings between Cairn India
and the rest of the Group are on terms approved by the audit committee of Cairn
India;
• a non-compete agreement governing the relationship between Cairn India and
Capricorn in respect of opportunities in South Asia; and
• transition support agreements relating to the provision of certain corporate
and technical functions which Cairn India and Cairn Energy India Pty Limited (a
member of the Cairn India Holdings Group) may require from the Group during an
initial period of 6 months (or longer for certain legal and tax services)
following the Flotation.
In preparation for the Disposal and the Flotation, the registrations of the
'Cairn' name and logo have been transferred to Cairn India and certain
arrangements as regards the future use of the ''Cairn'' name have also been
agreed between the Company and Cairn India. In addition to these agreements and
arrangements, the Group has certain rights under the Cairn India Articles,
including (subject to the satisfaction of certain conditions) the right to
appoint up to three directors of Cairn India.
9. Financial effects of the Disposal and the Flotation
As at 30 June 2006, the Group had consolidated net assets of approximately
$742.7 million. The illustrative consolidated net assets of the Group as at 30
June 2006, on a pro forma basis and adjusted to reflect the Disposal and the
Flotation (as if they had taken place at that date), would have been
approximately $2.6 billion (before any adjustment is made for minority
interests).
10. Current trading and prospects for the Group
Current trading is in line with the trends and conditions observed in the
interim results of the Company for the six months ended 30 June 2006, announced
on 5 September 2006. The Board believes that the prospects for the Group in the
current financial year are satisfactory.
11. Extraordinary general meeting
The Disposal, the Flotation, the adoption of the Cairn India Schemes
and the adoption of the New Group Schemes are conditional, amongst other things,
upon Shareholder approval being obtained at the EGM. As regards the Disposal,
Shareholder approval is required under the Listing Rules of the UK Listing
Authority because of the size of the Cairn India Holdings Group (the subject of
the Disposal) relative to the size of the Group. As regards the Flotation,
Shareholder approval is required under the Listing Rules of the UK Listing
Authority because the Group's percentage interest in Cairn India (the company
that will be floated on the Exchanges) will be diluted as a result of the
Flotation. As regards the adoption of the Cairn India Schemes and the New Group
Schemes, Shareholder approval is required pursuant to the Listing Rules of the
UK Listing Authority. Accordingly, the circular includes a notice convening the
EGM to be held at 50 Lothian Road, Edinburgh EH3 9BY at 11.00 a.m. on 17
November 2006, at which ordinary resolutions will be proposed to approve the
Disposal, the adoption of the Cairn India Schemes and the adoption of the New
Group Schemes.
14. Recommendation
The Board, which has received financial advice from Rothschild, considers the
Disposal and the Flotation to be in the best interests of Shareholders as a
whole. In providing advice to the Board, Rothschild has relied upon the Board's
commercial assessment of the Disposal and the Flotation. The Board also
considers that the adoption of the Cairn India Schemes and the adoption of the
New Group Schemes are in the best interests of Shareholders as a whole.
Accordingly, the Board recommends that Shareholders vote in favour of the
resolutions to be proposed at the EGM, as they intend to do in respect of their
own beneficial holdings of Shares amounting in aggregate to 1,530,956 Shares,
representing approximately 0.953 per cent. of the issued ordinary share capital
of the Company (as at 29 October 2006).
15. Other
Unless otherwise indicated, all references in this document to ''pounds
sterling'' or ''£'' are to the lawful currency of the United Kingdom, all
references to ''US dollars'', ''US$'' and ''$'' are to the lawful currency of
the United States and all reference to ''Rupees'' or ''Rs'' are to the lawful
currency of India. For the purpose of this announcement and unless otherwise
stated, a pound sterling to Rupee exchange rate of 1:85.15 and a US dollar to
Rupee exchange rate of 1:46.04 have been applied for illustrative purposes
(source: Financial Times: closing mid rate of exchange on 30 June 2006). Such
translations should not be considered as a representation that such currencies
could have been or could be converted into pounds sterling, US dollars or Rupees
(as the case may be) at any particular rate, the rates stated above or at all.
Enquiries to:
Analysts/Investors
Bill Gammell Chief Executive Tel: 0131 475 3000
Kevin Hart Finance Director
Mike Watts Exploration Director
Media
David Nisbet, Head of Group Communications
Brunswick Group LLP:
Patrick Handley, Mark Antelme Tel: 0207 404 5959
Cautionary note regarding forward-looking statements
This announcement includes certain forward-looking statements with respect to
the financial condition, results of operations and business of the Group and of
the Cairn India Group and certain plans and objectives of the Board. These
forward-looking statements can be identified by the fact that they do not relate
to any historical or current facts. Forward-looking statements often use words
such as ''proposed'', ''anticipate'', ''expect'', ''estimate'', ''intend'',
''plan'', ''believe'', ''will'', ''may'', ''should'', ''would'', ''could'' or
other words with a similar meaning. These statements are based on assumptions
and assessments made by the Board in light of its experience and its perception
of historical trends, current conditions, expected future developments and other
factors it believes appropriate. By their nature, forward-looking statements
involve risk and uncertainty and there are a number of factors that could cause
actual results and developments to differ materially from those expressed in, or
implied by, such forward-looking statements.
Actual results may differ materially from those suggested by the forward-looking
statements due to risks or uncertainties associated with the Group's and the
Cairn India Group's expectations with respect to, but not limited to: (i)
regulatory changes pertaining to the oil and gas industries in India, Nepal and
Bangladesh and their respective abilities to respond to those changes and to
implement successfully their respective strategies; (ii) their growth and
expansion; (iii) technological changes; (iv) exposures to market risks; (v)
general economic and political conditions in India, Nepal and Bangladesh, which
have an impact on their respective business activities or investments; (vi) the
monetary and fiscal policies of India, Nepal and Bangladesh; (vii) inflation,
deflation, unanticipated turbulence of the financial markets in India, the
United Kingdom and globally; (viii) changes in domestic laws, regulations and
taxes; and (ix) changes in competition in their industry.
For further discussions of factors that could cause the Group's or the Cairn
India Group's actual results to differ, please see the section entitled ''Risk
Factors'' set out in Part IX of the Circular. By their nature, certain market
risk disclosures are only estimates and could be materially different from what
actually occurs in the future. As a result, actual future gains or losses could
materially differ from those that have been estimated.
These forward-looking statements speak only as at the date of this announcement.
Save as required by the requirements of the Financial Services Authority or the
London Stock Exchange plc or otherwise arising as a matter of law, the Company
expressly disclaims any obligation or undertaking to disseminate after
publication of this announcement any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Group's or the Cairn
India Group's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
Cairn India Limited ('Cairn India') proposes to undertake a public issue in
India and has filed a Draft Red Herring Prospectus with the Securities and
Exchange Board of India. This announcement is not an offer for sale, or a
solicitation of offers to purchase, the shares in Cairn India to be offered in
the offering (the 'Shares') in any jurisdiction. No action will be taken to
permit the Shares to be sold in a public offer in any jurisdiction outside
India. In particular, no offer to the public will be made in any Member State of
the European Economic Area or in the United States. The Shares have not been and
will not be registered under the US Securities Act of 1933, as amended. This
announcement and the information contained herein are not for publication,
distribution or release in, or into, the United States, Canada, Australia or
Japan.
Appendix I - Board of Cairn India
The current members of the board of Cairn India are as follows:
Sir Bill Gammell (Non-Executive Chairman) (aged 53)
Sir Bill Gammell was appointed as Non-Executive Chairman of Cairn India on 22
August 2006. He holds a BA in Economics and Accountancy from Stirling
University. He founded the Company and was appointed Chief Executive on its
initial listing in 1988. He has over 25 years' experience in the international
oil and gas industry. He is Chairman of the Scottish Institute of Sport
Foundation, a director of the Scottish Institute of Sport and a director of
Artemis AiM VCT plc. He was awarded a Knighthood for services to industry in
Scotland in the 2006 UK New Years Honours List.
Norman Murray (Non-Executive Deputy Chairman) (aged 58)
Norman Murray was appointed as Non-Executive Deputy Chairman of Cairn India on
22 August 2006. He was appointed an independent non-executive director of the
Company in 1999 and Chairman in 2002. He is a qualified chartered accountant and
has been involved in the venture capital industry for over 25 years. He was a
co-founder and former Chairman of Morgan Grenfell Private Equity Limited, a
director of Morgan Grenfell Asset Management Limited and a non-executive
director of Bristow Helicopter Group Limited. He is a past Chairman of the
British Venture Capital Association and is currently President of the Institute
of Chartered Accountants of Scotland. He is also a non-executive director of
Greene King plc, Robert Wiseman Dairies PLC and Penta Capital Partners Holdings
Limited.
Rahul Dhir (Chief Executive Officer) (aged 40)
Rahul Dhir joined the Group in May 2006 and was appointed Chief Executive of
Cairn India on 22 August 2006. He was educated at the Indian Institute of
Technology in Delhi (Bachelor of Technology), the University of Texas at Austin
(Master of Science) and the Wharton Business School in Pennsylvania (Master of
Business Administration). He started his career as an oil and gas reservoir
engineer before moving into investment banking. He has worked at SBC Warburg,
Morgan Stanley and Merrill Lynch where he managed a team advising several major
oil companies and a number of independent E&P companies on merger and
acquisition and capital market related issues. Before joining Cairn India, he
was managing director and co-head of Energy and Power Investment Banking at
Merrill Lynch.
Lawrence Smyth (Chief Operating Officer) (aged 61)
Lawrence Smyth joined the Group (as managing director of Cairn Energy India Pty
Limited) in April 2005 and was appointed a director of Cairn India on 22 August
2006. He began his career in upstream refinery engineering and has been involved
in major projects. He also has experience of the exploration and production
aspects of the oil and gas industry. He has spent his 35-year professional
career in the oil and gas business. In the past decade, he has filled a number
of executive roles including, President of British Petroleum's business in
Colombia and President of the Sidanco Oil Company in Russia prior to its merger
with TNK/BP. During his technical and managerial career, he has sat on a number
of company boards and industry committees.
Jann Brown (Acting Chief Financial Officer) (aged 51)
Jann Brown was appointed acting Chief Financial Officer of Cairn India in August
2006. She is currently Group Financial Controller of the Company. It is
currently envisaged that she will replace Kevin Hart as Finance Director of the
Company following the EGM. She has served on the Group management board for
approximately seven years. She holds an MA from the University of Edinburgh and
joined the Company after a career in the accountancy profession, mainly with
KPMG. She is a member of the Institute of Chartered Accountants of Scotland and
The Chartered Institute of Taxation.
Hamish Grossart (Non-Executive Director) (aged 49)
Hamish Grossart was appointed a Non-Executive Director of Cairn India on 22
August 2006. He was appointed an independent non-executive director of the
Company in 1994 and became Deputy Chairman in 1996. He has 20 years' experience
on public company boards in a wide range of industries, both in an executive and
non-executive capacity. He is currently also Deputy Chairman of British
Polythene Industries PLC, Chairman of IndigoVision Group plc and a director of
Artemis Investment Management Limited.
Naresh Chandra (Independent Non-Executive Director) (aged 72)
Naresh Chandra was appointed a Non-Executive Director of Cairn India on 1
September 2006. He was previously the Chairman of the Indian Government
Committee on Corporate Governance, the Indian Government Ambassador to the
United States, an adviser to the Indian Prime Minister, the Cabinet Secretary to
the Indian Government and Chief Secretary of the State of Rajasthan. Mr Chandra
is currently a Non-Executive Director on a number of boards, including Tata
Consultancy Services Limited, Hindustan Motors Limited and Electrosteel Castings
Limited, amongst others.
Aman Mehta (Independent Non-Executive Director) (aged 60)
Aman Mehta was appointed a Non-Executive Director of Cairn India on 4 September
2006. Until 2003 he was the Chief Executive Officer of HSBC Asia Pacific. He is
currently also a non-executive director of Jet Airways (India) Limited, Tata
Consultancy Services Limited and Vedanta Resources plc.
Dr Omkar Goswami (Independent Non-Executive Director) (aged 50)
Dr Omkar Goswami was appointed a Non-Executive Director of Cairn India on 4
September 2006. Previously, he was Chief Economist for the Confederation of
Indian Industry and the Editor of ''Business India''. Dr Goswami has since
founded his own consultancy providing advice to companies on corporate
governance, corporate strategy, business restructuring and economic research. He
is currently a non-executive director on a number of boards, including Infosys
Technologies Limited.
Appendix II - Definitions
The following definitions apply throughout this announcement, unless the context
requires otherwise:
''ABN AMRO the unincorporated equity capital markets joint venture between
Rothschild'' ABN AMRO Bank N.V. and Rothschild, represented in the role of
book running lead manager by ABN AMRO Securities (India)
Private Limited;
''Board'' the board of directors of the Company;
''Bombay Stock The Bombay Stock Exchange Limited;
Exchange''
'Cairn Energy the closing middle market quotation of a share as derived from
PLC Closing the Daily Official List of the London Stock Exchange plc as at
Share Price' 27 October 2006 (the latest practicable date prior to the
publication of this announcement);
''Cairn India'' Cairn India Limited;
''Cairn India the articles of association of Cairn India;
Articles''
''Cairn India the Cairn India Employee Stock Option Plan (2006), which is
ESOP'' proposed to be approved at the EGM;
''Cairn India Cairn India and its subsidiary and associated undertakings (but
Group'' excluding the rest of the Group);
''Cairn India Cairn India Holdings Limited, the subsidiary of Cairn UK
Holdings'' Holdings that will be the subject of the Disposal;
''Cairn India Cairn India Holdings and its subsidiary and associated
Holdings Group'' undertakings from time to time (but excluding the rest of the
Group);
''Cairn India the Cairn India Performance Option Plan (2006), which is
POP' proposed to be approved at the EGM;
''Cairn India the Cairn India ESOP, Cairn India POP and the Cairn India
Schemes'' Senior Management Plan;
''Cairn India the Cairn India Senior Management Plan, which is proposed to be
Senior approved at the EGM;
Management
Plan''
''Cairn India equity shares in the share capital of Cairn India;
Shares''
''Cairn LTIP'' the Cairn Energy PLC Long Term Incentive Plan (2002);
''Cairn Share the Cairn Energy PLC 1996 Second Share Option Scheme, the Cairn
Schemes'' Energy PLC 2002 Unapproved Share Option Plan and the Cairn
Energy PLC 2003 Approved Share Option Plan;
''Cairn UK Cairn UK Holdings Limited, a wholly-owned subsidiary of the
Holdings'' Company;
''Capricorn'' Capricorn Energy Limited, a wholly-owned subsidiary of the
Company;
''Capricorn Capricorn and its subsidiary and associated undertakings (but
Group'' excluding the Cairn India Group);
'Circular' The circular in connection with the proposed flotation of Cairn
India Limited, approval of new share incentive arrangements and
notice of extraordinary general meeting
''the Company'' Cairn Energy PLC;
''connected shall have the meaning given to it by section 346 of the
person'' Companies Act 1985, as amended;
''Directors'' the directors of the Company;
''Disposal'' the proposed disposal of Cairn India Holdings by Cairn UK
Holdings to Cairn India pursuant to the Subscription and Sale
Agreement and the Share Purchase Deed;
''EGM'' the extraordinary general meeting of the Company to be held at
50 Lothian Road, Edinburgh EH3 9BY at 11.00 a.m. on 17 November
2006 (or any adjournment thereof);
''Exchanges'' the Bombay Stock Exchange and the National Stock Exchange;
''Flotation'' the proposed flotation of Cairn India on each of the Exchanges
and the associated offerings of Cairn India Shares and other
arrangements connected therewith, as more fully described in
the Circular;
''the Group'' the Company and its subsidiary and associated undertakings from
time to time (including the Cairn India Group following the
Disposal);
''Indian the business of developing the oil and gas assets and exploring
Business'' the exploration acreage referred to in Part II of the Circular;
''Indian The Government of India;
Government''
''Merrill DSP Merrill Lynch Limited;
Lynch''
''Morgan JM Morgan Stanley Private Limited;
Stanley''
''National Stock The National Stock Exchange of India Limited;
Exchange''
''NELP'' India's New Exploration Licensing Policy;
'NELP VI' the sixth NELP licensing round taking place in 2006;
''New Group the Company Long Term Incentive Plan (2006), which it is
LTIP'' proposed be approved at the EGM;
''New Group the New Group LTIP and the New Group Share Option Plan;
Schemes''
''New Group the Company Share Option Plan (2006), which it is proposed be
Share Option approved at the EGM;
Plan''
''Offer Price'' the final price at which Cairn India Shares are allotted and
issued in the Flotation;
''Over Allotment the option agreement among Cairn India, Cairn UK Holdings and
Option'' Merrill Lynch dated 12 October 2006 to enable Merrill Lynch to
over-allot Cairn India Shares in the Flotation and to undertake
price stabilisation activities following the Flotation;
'Rajasthan Block RJ-ON-90/1, India;
Block'
'Rajasthan a development area of 1,858 km2 in the Rajasthan Block, which
Development includes the Mangala, Aishwariya, Saraswati and Raageshwari
Area' fields;
''RBI'' the Reserve Bank of India;
''Relationship the agreement among Cairn India, Cairn UK Holdings and the
Agreement'' Company dated 4 October 2006 setting out certain aspects of the
relationship between the Group and the Cairn India Group;
''Resolutions'' the resolutions to be proposed at the EGM, as set out in the
notice of EGM at the end of the Circular;
''Rothschild'' N M Rothschild & Sons Limited;
''SEBI'' The Securities and Exchange Board of India constituted under
the Securities and Exchange Board of India Act 1992;
''SEBI SEBI (Disclosure and Investor Protection) Guidelines 2000, as
Guidelines'' amended from time to time;
''Shareholders'' holders of Shares;
'Share Purchase the share purchase deed among the Company, Cairn India and
Deed' Cairn UK Holdings dated 12 October 2006;
''Shares'' ordinary shares of 10 pence each in the share capital of the
Company;
''Subscription the subscription and sale agreement among the Company, Cairn
and Sale India Holdings, Cairn UK Holdings and Cairn India dated 15
Agreement'' September 2006 for the sale by Cairn UK Holdings and the
purchase by Cairn India of 21.85 per cent. of the issued share
capital of Cairn India Holdings (as amended by an amendment
agreement dated 5 October 2006);
''Underwriters'' ABN AMRO Rothschild, Merrill Lynch, Morgan Stanley, Citigroup
Global Markets India Private Limited, Kotak Mahindra Capital
Company Limited, HSBC Securities and Capital Markets (India)
Private Limited, ABN AMRO Asia Equities (India) Limited, JM
Morgan Stanley Financial Services Private Limited and Kotak
Securities Limited;
''UK or ''United the United Kingdom of Great Britain and Northern Ireland;
Kingdom''
''UK Listing the Financial Services Authority acting in its capacity as the
Authority'' competent authority for the purposes of Part VI of the
Financial Services and Markets Act 2000; and
''US'' or '' the United States of America, its territories and possessions,
United States'' any State of the United States of America and the District of
Columbia.
--------------------------
(1) Or approximately 67.2 per cent. in the event that the Over Allotment Option
is exercised in full
(2) Assuming Cairn India was to retain funds amounting to Rs 27.1 billion
(£316.3 million) from the expected gross proceeds of the Flotation of US$1.8
billion (or approximately US$1.9 billion in the event that the Over Allotment
Option is exercised in full) to fund its ongoing working capital requirements
(3) Based on a pound sterling to Rupee exchange rate of 1:85.7097, a US dollar
to Rupee exchange rate of 1:45.19 and a pound sterling to US dollar exchange
rate of 1:1.8967 (source: Financial Times: closing mid rate of exchange on 27
October 2006)
1 The currency amounts set out in the paragraph entitled 'Consideration' are
based on a pound sterling to Rupee exchange rate of 1:85.7097, a US dollar to
Rupee exchange rate of 1:45.19 and a pound sterling to US dollar exchange rate
of 1:1.8967 (source: Financial Times: closing mid rate of exchange on 27 October
2006)
(5) The currency amounts set out in the paragraph entitled 'The Disposal' are
based on a pound sterling to Rupee exchange rate of 1:85.7097, a US dollar to
Rupee exchange rate of 1:45.19 and a pound sterling to US dollar exchange rate
of 1:1.8967 (source: Financial Times: closing mid rate of exchange on 27 October
2006)
(6) The currency amounts set out in this paragraph are based on a pound sterling
to Rupee exchange rate of 1:85.7097, a US dollar to Rupee exchange rate of 1:
45.19 and a pound sterling to US dollar exchange rate of 1:1.8967 (source:
Financial Times: closing mid rate of exchange on 27 October 2006)
This information is provided by RNS
The company news service from the London Stock Exchange
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