Vedanta Resources merges two of its Indian entities

Putting rest to speculations, the Anil Agarwal-controlled Vedanta Resources Plc on Saturday formed the world’s seventh biggest natural resources company by merging two of its flagship Indian entities — Sterlite Industries and Sesa Goa.

According to the terms of the merger, aluminium and copper player Sterlite Industries will be merged with iron ore company Sesa Goa, at a ratio of 3:5. This means that the shareholders of Sterlite Industries will get 3 shares of Sesa Goa for every 5 shares held by the former. The new company will be called Sesa Sterlite with an expected market capitalisation of $20 billion.

Anil Agarwal, chairman, Vedanta Resources Plc, said: “The idea behind the merger is to mitigate the risks attached to commodity cycles as now we will have a diversified portfolio spreading across oil and gas, iron ore, aluminium, copper, zinc, lead, silver and power generation.” He said the transaction is EPS (earnings per share) accretive from day one for the shareholders of Sesa Goa, Sterlite and Vedanta.

Under the terms of the merger, Vedanta Aluminium, which is a drag on the balance sheet of parent company Vedanta Resources due to heavy losses, will be 100 per cent consolidated into Sesa Sterlite. Madras Aluminium Company will also be merged into the new entity.

Besides this, the entire 38.80 per cent holding of the parent company in Cairn India will be transferred into Sesa Goa and the new entity will eventually hold 58.9 per cent shareholding in Cairn. This will also include the associated debt of $5.9 ban, at cost.