Sesa-Sterlite merger expected this week

PTI, NEW DELHI | 18 June 2012 18:24 IST

Shareholders of Sesa Goa and Sterlite Industries will meet this week for approving the proposed merger of the two firms, as announced by their parent firm Vedanta Resources in February.

According to the notices given by the two Vedanta group companies, Sesa Goa shareholders will meet on Tuesday in Panaji to vote on the proposed merger.

Two days later, on June 21, Sterlite will convene a meeting of its shareholders in Tuticorin, Tamil Nadu for the same purpose.

The merger, which will lead to creation of a new entity, Sesa Sterlite, is aimed at simplifying the group structure of London-listed Vedanta group and would create seventh largest natural resources company of the world (in terms of EBITDA), the Anil Agarwal-promoted firm had said earlier.

This is second restructuring exercise being attempted by the Vedanta Resources in last four years as the first exercise had failed in 2008 due to objections raised by some minority shareholders over valuation of a group firm, Konkola Copper Mines.

This time too concerns have been raised by certain financial institutions, having stake in Sesa Goa, over most of Vedanta’s debt (at about $9 billion) being transferred to the new entity, Sesa Sterlite.

However, senior officials of Vedanta group said they have tried to allay the concerns of the minority investors in the last few months and there should not be any opposition during the shareholders’ meeting.

“There is no objection (to the restructuring), We have met them and explained the entire exercise in detail. I think we would get a favourable outcome (at the shareholders meeting),” a senior Vedanta group official said.

As per the restructuring exercise, Sesa Sterlite will become the holding company of Vedanta’s all group firms, except Konkola Copper Mines. Post merger, Vedanta will hold 58.3 per cent stake in Sesa Sterlite.

Besides, it will also lead to Vedanta’s debt falling by about 61 per cent to $3.8 billion and debt service liability coming down to $180 million from current levels of $500 million. However, Sesa Sterlite would end up with a total debt of about $14 billion post merger.

As per the scheme of arrangements, Sterlite shareholders will get three shares of Sesa Goa for every five shares held according to the swap ratio. The exercise is expected to be completed by December-end, the Vedanta group had said earlier.

For the restructuring, both, Sesa Goa and Sterlite have secured approvals from stock exchanges where they are listed (BSE and the NSE) and the Competition Commission of India so far.

Post merger, Cairn India, Hindustan Zinc, Balco, Vedanta Aluminium, Madras Aluminium, Talwandi Sabo Power and Australian Copper Mines will become subsidiaries of Sesa Sterlite.


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