Centre opposes Hindustan Zinc's $2.98 billion deal for Vedanta zinc assets
1 min read 20 Feb 2023, 10:52 AM ISTThe government holds around 30% stake in Hindustan Zinc, while Vedanta is the company's largest shareholder.
PremiumIndia's federal government has opposed Hindustan Zinc's proposed $2.98 billion acquisition of zinc assets from Vedanta Ltd, a letter from the government to the company showed on Monday. The deal was announced on January 19, according to the news agency Reuters.
It showed that the directors nominated by the government at Hindustan Zinc had dissented from the proposed deal announced. The government holds around 30% stake in Hindustan Zinc, while Vedanta is the company's largest shareholder.
According to the letter, the government reiterated its dissent to the "related party transaction". "We would urge the company to explore other cashless methods of acquisition of these assets."
The government will oppose any further resolutions on the deal and explore all legal avenues available to it, it added.
According to the Union mines ministry, the HZL board’s January decision to acquire these assets violates minority shareholder rights. Vedanta owns a 64.9 percent stake in HZL and the government of India 29.5%.
The HZL board on 19 January obtained approval for the acquisition of Zinc International assets of THL Zinc Ventures Ltd (Mauritius), a wholly owned subsidiary of Vedanta, through THL Zinc Ltd (Mauritius). THL Zinc Ltd will become a wholly owned subsidiary of Hindustan Zinc. Government officials have been cited as saying that its representative on the board opposed the proposal at the meeting.
The government plans to sell the residual stake in HZL in tranches of about 5-10% to start with, but the move is unlikely to materialize in the near term, and the disinvestment itself may be in limbo for some time.
A JM Financial Institutional Securities 19 January report titled ‘Much needed growth optionality, albeit at expensive valuations,’ said: “The company shall seek shareholder approval in February while other approvals are expected within 18 months."
(With Reuters inputs)
