NRI business tycoon Anil Agarwal-led Vedanta Resources will pay $1.37 billion (about Rs 5,700 crore) for acquiring 71 per cent stake in India's biggest iron ore exporter Sesa Goa, outbidding giants like Arcelor Mittal and Aditya Birla Group.
London Stock Exchange-listed Vedanta has bagged a deal for buying 51 per cent stake in Sesa Goa Ltd from its Japanese parent Mitsui & Co Ltd for $981 million (around Rs 4,070 crore) in cash.
It also plans to purchase an additional 20 per cent stake through an open offer to be launched soon. Vedanta said the deal would create India's largest diversified mining group, with "leading market positions in aluminium, copper, zinc and iron ore together with an industry leading pipeline of expansion projects".
"This acquisition provides us with an industry leadership position in the attractive iron ore business in India," Anil Agarwal, chairman, Vedanta Resources said in a statement.
"Sesa Goa is a natural fit for Vedanta; it is an efficient, low-cost miner with growth opportunities in one of the world's fastest growing economies. This transaction is immediately earnings and cash-flow accretive and will create significant long-term value for our stakeholders," he added.
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 acquisition of about half of a Brazilian iron-ore project, which was revealed on Monday.
The mining space has witnessed M&A deals close to $70 billion so far this year. Vedanta said the open offer to the public shareholders of Sesa Goa to acquire further 20 per cent stake was expected to close by July 2007.
While the total cash consideration for 71 per cent of Sesa Goa stake was $1.37 billion, the deal would be funded through a mix of newly committed bank debt facilities of $1.1 billion and existing cash resources, it said.
Vedanta said it has acquired Mitsui's 100 per cent stake in Finsider International Ltd UK, which owns 51 per cent stake in Sesa Goa, at a price of Rs 2,036 per share of Sesa Goa.
Shares of Sesa Goa closed at Rs 1,742.30 at the Bombay Stock Exchange on Monday before the announcement of the deal and were trading 1.5 per cent down at Rs 1,716 a share in intra-day trade today.
The 50-year old Sesa Goa, which has mining operations across iron ore-rich states like Goa, Karnataka and Orissa, was under Italian management before Mitsui acquired it in 1996.
The company sells about 10 million tonnes of iron ore, of which over 95 per cent is exported to global steel companies in China, Europe and Japan.
At current production rates, its iron ore reserves and resources of 207 million tonnes would support over 20 years of mined output.
Sesa Goa is a debt-free company and reported group turnover of $432.2 million and profit before tax of $193.8 million in 2005-06. It has gross assets worth $276.2 million as on March 31, 2006. Vedanta, mainly engaged in production of aluminium, zinc and copper, is a diversified metals and mining group.
Its main operations are located in India, Zambia and Australia. Separately, Mitsui said in a statement the after-tax proceeds from the transaction would be about Yen 50 billion (about $420 million). The deal was in line with its corporate strategy, it said.
