Shareholders of Cairn Energy Plc can expect a refund of as much as $700 million once the British oil producer settles a long-running tax dispute with India.
Cairn said Tuesday it expects the feud with the government to be resolved “shortly”, allowing the company to pay a special dividend and buy back shares. A settlement would end a multi-year battle, in which Cairn filed lawsuits in numerous places worldwide to enforce an arbitration ruling in his favor.
The total payment from India should be about $1.06 billion, Cairn said in a statement. After returning the money to investors, it plans to spend the remaining proceeds on its assets.
Shares of the company rose a staggering 8.2% in London, its biggest intraday gain in a month, and rose 0.6% at 196.2 pence as of 8.38am local time.
“We expect the return of capital to shareholders this year,” said Chief Executive Officer Simon Thomson during a conference call. “The Indian government is very focused on resolving this as soon as possible and they are aiming for completion in the coming weeks.”
India opened the way to a solution after scrapping a retroactive tax rule that had sparked billions of dollars in arbitration battles with international companies including Cairn and Vodafone Group Plc.
Cairn received its tax claim from authorities six years ago for a restructuring it carried out in 2006 as it prepared for an IPO of Cairn India. Last year, an international arbitration tribunal ordered India to repay $1.2 billion plus interest, but the money was not forthcoming.
To be eligible for the refund, Cairn said on Tuesday it must withdraw its claim for arbitration, interest and costs and terminate all law enforcement actions.
Following the government’s settlement, shareholder resolutions on the proposed $500 million dividend and a whopping $200 million buyback could take four to six weeks, Thomson said.