BackSesa, Sterlite shareholders approve merger
Sesa, Sterlite shareholders approve merger
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Mumbai: Shareholders of Sesa Goa Ltd and Sterlite Industries (India) Ltd—units of billionaire Anil Agarwal’s Vedanta Resources Plc—have agreed to a proposal to combine into a diversified mining company called Sesa Sterlite, capping four months of debate and anxiety over the amount of debt that will be transferred from the books of the London-based parent to the new entity.
In regulatory filings submitted to BSE on Monday, the two companies said shareholders approved the merger of Sesa Goa, Sterlite Industries, Madras Aluminium Co. Ltd, Sterlite Energy Ltd, Cairn India Ltd and Vedanta Aluminium Ltd (VAL). All are subsidiaries of Vedanta Resources.
The proposal for the merger was made in February by Vedanta, which said it was simplifying its business structure by merging its Indian subsidiaries into a single unit to reduce debt and cut costs. The transaction has drawn flak from some sector analysts, a few minority shareholders and the Institutional Investor Advisory Services (IIAS), a proxy advisory firm, over the debt transfer.
A 16 June research report by Barclays Capital said the new entity will have “a considerably higher net debt of $7.5 billion" when compared with the current $900 million (Rs 5,130 crore today) of debt on Sesa Goa’s books. The bulk of it was taken on to fund Vedanta’s acquisition of a stake in the Indian arm of Cairn Energy Plc and VAL.
About 79.12% of Sesa Goa’s valid votes by value were in favour of the merger while 92% of the valid votes cast by Sterlite shareholders supported it, according to regulatory filings.
A sizeable number of votes were cast aside as invalid, noted IIAS. If one were to count in all the votes cast—those deemed valid as well as those that were not—the majority that voted for the merger proposal fell from 79.12% to 76.47% for Sesa Goa and from 92% to 89.38% for Sterlite. The special resolution needed at least 75% of the votes in favour of the merger to push it through.
“There are a large number of invalid votes here, and this is a good opportunity to move to electronic voting," said Amit Tandon, IIAS founder and managing director. “We would like to know why a vote is termed invalid? Did it reach late or the signature didn’t tally or the format was not acceptable? It is part of investor services for us to be able to tell them (minority shareholders) what is an invalid vote and how to cast a valid one."
He added that this meant some shareholders may have gone all the way to the meetings—to Goa for Sesa Goa’s vote on 19 June, and to Tuticorin (Tamil Nadu) on 21 June for Sterlite’s—only to realize that their votes didn’t count. “Electronic voting would also make the process more participative," he said.
IIAS had recommended voting “against" the proposal citing “operational hurdles of VAL (i.e. mining rights) and the additional debt of VAL and Cairn India that will be transferred to the combined new entity without fully resolving issues with regard to mining".
It also picked on the “premium valuations" at which VAL is being transferred to Sesa Sterlite, giving Vedanta’s shareholders a “gain of at least ₹ 1,640 crore".
Another such advisor, Bangalore-based InGovern, had recommended voting “for" the merger, but given it a “starred" status, adding caveats that shareholders should “weigh the risks associated—allegations of human rights violations, environmental risks— with VAL and raise these concerns" with the management.
Sesa Goa’s largest minority shareholder, Templeton Asset Management Ltd, was not in favour of the merger, The Economic Times reported on 2 June. It is hard to specify which firms voted against the deal from the disclosures made to the stock exchanges. Templeton said it does not answer stock-specific queries.
VAL recently acquired a stake in Raykal Aluminium Co. Pvt. Ltd, promoted by Larsen and Toubro Ltd, which will give it access to two bauxite mines—a crucial raw material for aluminium that it needs to turn profitable.
The two mines are estimated to hold about 250-280 million tonnes of the mineral and the entire bauxite excavated will be available for Raykal and VAL although sector analysts say it is hard to say what are the synergies from the acquisition right away.
Sesa Goa shares rose 0.78% to close at ₹ 187.35 per share on Monday on BSE while Sterlite Industries declined 0.5% to close at ₹ 99.15. The benchmark index, the Sensex, fell 0.53% to close at 16,882.16 points.
Since 24 February, when the merger deal was announced, Sesa Goa shares have fallen 17.59% while Sterlite has dropped 16.43%. The Sensex has declined 5.81% over the same period.
bhuma.s@livemint.com
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