A man waters plants outside the Indian headquarters of Vedanta Resources in Mumbai. Vedanta will absorb unit Cairn India, combining India’s biggest miner of aluminium and copper with its largest onshore oil producer.Bloomberg/MumbaiBillionaire Anil Agarwal’s Vedanta will absorb unit Cairn India, combining India’s biggest miner of aluminium and copper with its largest onshore oil producer.The all-stock deal will offer each Cairn India shareholder one ordinary share, and a 7.5%-redeemable preference share of Vedanta with a face value of Rs10, according to statements from both the companies yesterday. The deal will give shareholders an implied premium of 7.3% over the last traded price of Cairn India stock.The combined entity will help Agarwal, weighed down by $12bn of group debt amid a downturn in crude oil and aluminium, reorganise the group’s assets and liabilities. It will also give him access to Cairn India’s $2.7bn of cash.Oil and gas will remain the key focus of Cairn India and Vedanta intends to protect the Cairn brand, Vedanta Resources Chief Executive Officer Tom Albanese said at a media briefing in Mumbai yesterday after the merger announcement. The enlarged group will boost capital access, Cairn India CEO Mayank Ashar told reporters.Vedanta is at an advanced stage to refinance $2bn of debt maturing in the middle of next year, Vedanta Resources Chief Financial Officer DD Jalan said at the briefing. Vedanta’s debt cost may decline or remain at 7.5%, he said.Post-merger, London-listed parent Vedanta Resources’ holding in Mumbai-listed Vedanta will drop to 50.1% from 62.9%. Vedanta will also consider absorbing some overseas units to simplify the group structure, it said.Vedanta, the nation’s second-most indebted metals company, is facing shrinking profit margins after the premium paid for immediate delivery of aluminium plunged 70% from a November record. Crude’s 45% plunge in the past year led to Cairn India’s first quarterly loss in more than seven years. The company produces oil and gas from three of its seven blocks in India.“We see little change in EPS or target price due to merger of Cairn India but see improvement in balance sheet as key variable in achievement of our target price for Vedanta,” according to a June 9 note by Macquarie Capital Securities India. “Also it removes the corporate governance risks as seen from loans and advances from Cairn India to Vedanta.”Slumping crude prices prompted Vedanta to take a $3bn non-cash write-down on account of the decline in the goodwill value of Cairn India. The oil producer decided to cut back its capital expenditure plans for the year ending March 31 to $500mn from $1.2bn. The company will continue with a significant capex plan, Ashar said at the briefing yesterday.Lazard & Co advised Vedanta on the deal, while DSP Merrill Lynch and JM Financial Institutional Securities were the advisers for Cairn India. JP Morgan Cazenove and Morgan Stanley assisted Vedanta Resources, according to the statement.Vedanta’s group debt surged to Rs777.52bn ($12bn), excluding a $1.25bn intercompany loan from Cairn India, after Agarwal bought the oil producer in 2011 and began expanding aluminium and power-generation capacity. More than a quarter of the company’s operating profit came from aluminium in the last quarter, with other businesses including zinc and crude oil contributing the remainder.The metal producer has a $1.9bn of mostly short-term loans maturing this year, which it plans to refinance into longer-term instruments, Chief Financial Officer DD Jalan said in an earnings call on April 29.Vedanta, earlier known as Sesa Sterlite in 2013 consolidated its iron ore mining business by merging Sesa Goa with Sterlite Industries (India), which ran copper and aluminium businesses. Vedanta Resources also transferred its 38.8% holding in oil producer Cairn India, including a debt of $5.9bn to the new company.Vedanta also owns a 64.9% stake in Hindustan Zinc, which has $4.8bn of cash, according to data compiled by Bloomberg.