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Vedanta may offer 25% higher price for HZL, Balco stake

The company is seeking shareholders' approval to offer Rs 18,600 crore and Rs 3,000 crore for buying out remaining stakes in HZL and Balco respectively

Read more on:    Vedanta | Balco | Hindustan Zinc
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Group may shell out Rs 21,635 crore, up to 25% more than planned earlier, for buying the Government's remaining stakes in and as its previous offers have not been accepted so far.

Vedanta has called a shareholders meet on August 28 in London, alongside its annual general meeting, to seek nod for the sweetening of its offers for acquiring the remaining government stakes in the two firms.

Vedanta spokesperson did not respond to the queries.

If it goes through, this deal alone could meet over 72% of the government's disinvestment target of Rs 30,000 crore for this year.

Vedanta had acquired 51% stake in Balco in 2001 and 64.9% stake in Hindustan Zinc Ltd (HZL) during 2002-2003.

The group, in January, had offered Rs 15,493 crore for buying 29.5% in HZL, and Rs 1,782 crore for 49% residual holding in Balco.

After shareholders approval, the company Board would have the powers to raise the offer price up to Rs 18,606.10 crore ($3.378 billion) for HZL, and up to Rs 3,028.78 crore ($550 million) for Balco.

"As the Government of India (GoI) has not, to date, accepted the Company's offers, approval from shareholders is being sought on the basis that the Company is authorised to negotiate the acquisition of the entirety of the GoI's interest in HZL for an aggregate consideration not more than 15% higher than the price offered and in Balco for an aggregate consideration not exceeding $550 million," it said in a notice to company shareholders.

The 15% increase in the previous offer of $2.938 billion (Rs 15,493 crore), for which shareholders' nod has been sought, amounts to $3.378 billion (about Rs 18,606 crore at the dollar-rupee exchange rate taken by Vedanta on August 7).

For Balco's remaining stake, the company has pegged the new price at $550 million (Rs 3,028.78 crore), an increase of 62.72% from the offer of $338 million (about Rs 1,782 crore) made in January.

Taken together, it becomes 19.92% increase in the offer price of January in US dollar terms.

The offer gets sweetned by 25.24% in Indian currency at Vedanta's conversion price of dollar-rupee of August 7 at Rs 55.0688 for a dollar.

According to the company, after making the offers for the two firms in January, it has written to the government twice in April and July.

The offer has not been accepted yet.

It said the shareholders' approval would allow it "to complete the transactions in a timely manner".

The Anil Agarwal-led firm is being advised by J P Morgan Cazenove for the two transactions.

Stating that the acquisition of remaining stakes in HZL and Balco are not linked to each other, Vedanta has cautioned shareholders that there is no certainty about the timeline of the transactions as the government has not yet accepted its offers.

It further said that the shareholders' nod, if given for the two acquisitions, will be valid till August 9, 2013. In case of the two deals not happening by then, further shareholder approval would be required.

HZL is the country's largest zinc producer. It has a zinc-lead production capacity of over 1 million tonne per annum (MTPA), while its silver production capacity stands at 16 Moz.

Balco, which was acquired by Vedanta in 2001, produced 246 kilo tonne of aluminium in last financial year. Currently it is expanding smelting capacity to 0.6 MTPA, with captive power units.

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