| To pay Rs 4,086 crore for Mitsui's 51% stake.
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| Anil Agarwal-controlled Vedanta Resources today acquired Sesa Goa, the country’s second-largest iron ore producer, for Rs 4,086 crore, outbidding the Aditya Birla Group’s closely-held entity, Essel Mining & Industries, and the world’s largest steel company, Arcelor Mittal.
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| Vedanta has agreed to pay Rs 2,036 a share for Japan’s second biggest trading firm Mitsui & Co’s 51 per cent stake in Sesa Goa, a premium of 20 per cent over today’s close of Rs 1,698.55 on the Bombay Stock Exchange, to secure control over mines in Orissa, Karnataka, and Goa.
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| It will also launch the mandatory 20 per cent open offer in four days at the same price for the retail shareholders of Sesa Goa, which produces nearly 10 million tonnes of iron ore a year and has estimated reserves of 207 million tonnes. The offer will close by July.
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| If the open offer is fully subscribed, the acquisition cost will go up to Rs 5,706 crore. Vedanta will finance the deal through a fresh loan of $1.1 billion (Rs 4,581 crore) and internal accruals.
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| Vedanta’s shareholding will go up to 71 per cent after the offer. Nomura advised Vedanta on the acquisition.
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| “The acquisition provides us an opportunity to get into the iron ore business. It is a natural fit for Vedanta as it is an efficient, low-cost miner with growth opportunities in the world’s fastest-growing economies. This transaction is accretive to earnings and cash flow,” said Vedanta Chairman Anil Agarwal.
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| He was unwilling to say when he would join the Sesa Goa board as chairman.
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| The sale will generate $423 million (Rs 1,761 crore) in profit, Mitsui said in a statement. Morgan Stanley advised Mitsui, which had bought stakes into Sesa Goa 10 years ago.
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| The acquisition will make Vedanta an integrated mining and metals company, Agarwal said. Iron ore will contribute 11 per cent to the group’s turnover. The other companies of the group are Balco, Hindusthan Zinc, Madras Aluminium and India Foils.
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| Sesa Goa will also help shield Vedanta’s earnings from volatility in metal prices, analysts said.
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| Agarwal said his outlook on metal prices was bullish. “I expect prices will hover around $5,000 a tonne for copper, $3,000 for a tonne of zinc and $2,500 for aluminium.”
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| Sesa Goa posted an operating profit of Rs 860 crore on sales of 1,870 crore in 2006.
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| Vedanta is paying 31 per cent more than the stock’s six-month daily average to get its first iron ore mine in India. Iron ore is the key raw material for steel production. The country’s demand for steel is growing at almost twice the global average. |
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