Mumbai/London:NRI business tycoon Anil Agarwal-led Vedanta Resources has bought 51% of iron-ore exporter Sesa Goa Ltd and said on 24 April 2007 that it planned to buy a further 20% , bringing the total cost of the deal to $1.37 billion (Rs.5,754 crore).
The UK-listed Vedanta said it had bought Mitsui and Co Ltd’s 51% stake in Sesa Goa for $981 million in cash, or Rs2,036 a share, and that it was launching an open offer to buy a further 20% of the Indian firm at the same price.
The deal marks India-focused Vedanta’s entry into the lucrative iron ore market, adding to its existing strengths in aluminium, copper and zinc. Iron ore has been in strong demand in recent years as rapid growth in China and India has fuelled a surge in global steel production.
“This acquisition provides us with an industry leadership position in the attractive iron ore business in India,” Vedanta Resources Chairman Anil Agarwal said in a statement.
“This appears to be a typical ‘Vedanta-style´ acquisition with expected quick de-bottlenecking and ability to leverage its capital, operating and regional expertise as well as providing diversification,” JP Morgan analysts said in a research note.
At 1045 GMT, Vedanta shares were up 0.2% at 1,413 pence, valuing the business at about 4 billion pounds (Rs32,900 crore). Shares in Sesa Goa, India’s biggest private sector iron ore exporter, fell 3 % to 1,690 rupees.
V.K. Sharma, head of research at Anagram Stock Broking, said Sesa Goa shares were down because only about 40% of freely floated shares could participate in Vedanta’s open offer, which is 16.9% above Monday’s closing price.
Sources familiar with the matter earlier told Reuters that Vedanta had agreed to buy Mitsui’s stake in Sesa Goa. Other sources said it beat rival bids from the steelmaking giant Arcelor Mittal and India’s Aditya Birla group.
This is the third metal sector deal focussed on iron ore capacities in less than a week after Indian conglomerate Essar Group’s announcement last week to acquire ore rich Minnessota Steel in the US and the British mining giant Anglo American’s proposed 1.5 billion dollar acquisition of about half of a Brazilian iron-ore project, which was revealed yesterday.
The mining space has witnessed merger and acquisition deals close to $70 billion so far this year.
DIVERSIFICATION INTO STEEL-MAKING
Vedanta Deputy Chairman Navin Agarwal told reporters in London that, after buying Mitsui’s stake, his firm was required by Indian takeover rules to launch an open offer for at least a further 20% of Sesa Goa shares.
Navin Agarwal said Vedanta aimed to boost production to around 15 million tonnes in one to two years time and that the firm might also look to expand into steelmaking, with a partner.
“Our current sense is that this is something which we do not want to do on our own and possibly we would look at a joint venture partner,” he told a conference call. “There’s no decision at this point of time. It’s just something we will look at as we progress this company.”
He declined to say whether Vedanta might eventually seek to raise its stake beyond 71% . But his brother, Chairman Anil Agarwal, who owns about 54% of Vedanta, later said there were no plans to delist Sesa Goa.
“This transaction is immediately earnings and cash flow accretive and we believe it will create significant long term value for all our stakeholders,” Vedanta said in a statement.