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Vedanta is a London listed FTSE 100 diversified global natural resources major. The Group produces aluminium, copper, zinc, lead, silver, iron ore, oil & gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Liberia, Ireland, Australia and Sri Lanka. With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of entrepreneurship, excellence, trust, inclusiveness and growth.
Yash Ved of IIFL provides the highlights of a media interaction where Anil Agarwal says "Sesa-Sterlite Capital spending will be $6 bn in the next three years"
Brief us about the merger of Sesa-Sterlite and Vedanta Group consolidation?
Sterlite Industries (India) Ltd , Sesa Goa Ltd and Vedanta Resources Plc together with its subsidiaries has announced a recommended merger of Sesa Goa and Sterlite and the proposed consolidation and simplification of the Group structure.
The transaction involves merger of Sterlite into Sesa Goa in the ratio of three shares of Sesa Goa, the country's largest iron ore exporter, for five Sterlite shares.
Sesa Sterlite merger will be one of the largest global diversified natural resources majors. The consolidation is expected to lead to significant synergies, including economies of scale, more efficient movement of group cash, improved allocation of capital and corporate cost savings including tax efficiencies.
Sesa Sterlite will be the principal operating company in the group and with its high quality assets, growth projects and strong management, it is well placed to create value for all shareholders.
Sesa Sterlite will have exposure to zinc-lead-silver, iron ore, oil & gas, copper, aluminium and commercial power with assets located in India, Australia, Liberia, South Africa, Namibia, Ireland and Sri Lanka. This world class asset base will benefit from the previously announced capex programme that is largely invested, with capacity expected to double in the next three years.
What next as far as the merger is concerned?
After obtaining all necessary approvals, the shares to be issued by Sesa Goa shall be listed on the Bombay Stock Exchange and National Stock Exchange of India where the existing shares of Sesa Goa are currently listed, and its ADS shall be listed on the NYSE, which will be consistent with Sterlite’s existing listing arrangements.
Based on Sesa Goa’s closing price on 24 February 2012 of Rs 227 per share, the equity value of VAL equates to Rs23.32bn. ($473 mn).
VAL will demerge its aluminium business undertaking into Sesa Sterlite. Demerger shall be effective after VAL becomes a subsidiary of Sesa Sterlite pursuant to the merger of Sterlite and Ekaterina
What are the approvals to be taken for Sesa-Sterlite merger?
Approvals will be sought from Shareholders and creditors of Sesa Goa, Sterlite, VAL and MALCO, BSE and NSE, Competition Commission of India, Foreign Investment Promotion Board, India, Jurisdictional High Courts at Mumbai (Goa Bench) and Madras in India and the Supreme Court of Mauritius, Regulatory and other approvals as may be required.
The transfer of Vedanta’s interest in VAL to Sesa Goa will require approval from the Foreign Investment Promotion Board in India.
How will the Sesa-Sterlite merger benefit the companies?
These synergies are expected to generate cost savings of Rs10bn ($200 million) per annum. The consolidation is expected to be earnings accretive to Sesa Goa, Sterlite and Vedanta shareholders immediately post completion. This transaction is expected to close during CY 2012
What will be the Sesa-Sterlite capex over next three years?
Capital spending will be $6 bn in the next three years
What is the current valuation of Sesa Sterlite?
The combined entity Sesa Sterlite is estimated to be valued over $20 bn
How will the Sesa-Sterlite management roles change?
The Board of Sesa-Sterlite will have a majority of independent directors. The management team of Sesa-Sterlite will include members of the current management team.
What is the current Sesa-Sterlite debt?
Sesa-Sterlite current debt stands at $5.9 bn.
Post consolidation, how much Vedanta will own stake in Sesa Sterlite?
Post consolidation, Vedanta will own a 58.3% shareholding in Sesa Sterlite
What percentage of stake Sesa-Sterlite will own in Cairn India?
Sesa Sterlite will own 58.9% of Cairn India, one of the largest private sector oil & gas companies in India and among the top 20 independent exploration and production companies globally with the market cap of approximately $15 billion.
How much will Vedanta’s debt reduce with Sesa-Sterlite merger?
Vedanta’s debt will fall 61% to $3.8 bn and the debt-service cost will be reduced by $300 mn for the year ending March 31, 2013.