Sesa Goa, Sterlite merger to cut Vedanta debt by 60pc
Monday, 27 February 2012
MUMBAI, Feb 26 (Business Standard): Vedanta Resources, the holding company of Sesa Goa and Sterlite Industries, has decided to merge the two companies in a bid to cut debt and improve cash flows.
The merger, to be executed through an all-share transaction, will give birth to Sesa Sterlite, the world's seventh-largest diversified resources company.
London-based Vedanta on Saturday said investors would get three Sesa Goa shares for every five shares of Sterlite. Vedanta would transfer its 38.8 per cent holding in Cairn India, including a debt of $5.9 billion (around Rs 300 billion), to the new company that would hold 58.9 per cent of Cairn India. Sesa Goa already directly holds 20 per cent in Cairn India.
Vedanta's debt would fall 61 per cent to $3.8 billion (around Rs 180 billion) and the debt-service liability would be reduced by $300 million (Rs 15 billion) for the year ending March 31, 2013, the company said in a presentation after announcing the merger.
The group expected cost savings of $200 million (Rs 10 billion) a year from the restructuring, vice-chairman Navin Agarwal told analysts in a conference call, adding the transaction was expected to be earnings-accretive in the first year itself.
The merger, to be executed through an all-share transaction, will give birth to Sesa Sterlite, the world's seventh-largest diversified resources company.
London-based Vedanta on Saturday said investors would get three Sesa Goa shares for every five shares of Sterlite. Vedanta would transfer its 38.8 per cent holding in Cairn India, including a debt of $5.9 billion (around Rs 300 billion), to the new company that would hold 58.9 per cent of Cairn India. Sesa Goa already directly holds 20 per cent in Cairn India.
Vedanta's debt would fall 61 per cent to $3.8 billion (around Rs 180 billion) and the debt-service liability would be reduced by $300 million (Rs 15 billion) for the year ending March 31, 2013, the company said in a presentation after announcing the merger.
The group expected cost savings of $200 million (Rs 10 billion) a year from the restructuring, vice-chairman Navin Agarwal told analysts in a conference call, adding the transaction was expected to be earnings-accretive in the first year itself.