Sesa Goa, a subsidiary of Anil Agarwal-controlled Vedanta Resources Plc, has purchased the iron ore assets of Goa-based Dempo group for Rs 1,750 crore.
Sesa Goa, a subsidiary of Anil Agarwal-controlled Vedanta Resources Plc, has purchased the iron ore assets of Goa-based Dempo group for Rs 1,750 crore.
Late on Thursday, Sesa Goa said the two companies have inked a definitive share purchase agreement.
Sesa Goa has acquired all outstanding common shares of the group flagship, V S Dempo & Co Pvt Ltd, which also holds 100% shares of Dempo Mining Corporation Pvt Ltd and 50% equity shares of Goa Maritime Pvt Ltd.
The Dempo group’s major products are iron ore fines, calibrated iron ore lumps and low-phosphate magnetite concentrates.
The deal is on a debt-free and cash-free basis, and includes net working capital of Rs 145 crore, Sesa Goa said. The transaction has been funded by Sesa from internal accruals.
Sesa Goa had been looking for acquisitions since it had cash reserves of Rs 4,143 crore as of March 31, 2009, and wanted to increase its iron ore reserves base, said an analyst with a foreign brokerage in Mumbai, not wishing to be named.
“The replacement cost for this deal is just $5 per tonne, which is very good for Sesa Goa given that it gets the infrastructure and logistics of Dempo also. Moreover, Dempo’s reserves are near the port. Clearly, a very good deal for Sesa,” the analyst said. Ambit Corporate Finance was the advisor to Dempo. Luthra & Luthra, the New Delhi-based lawyers, were legal advisors to Sesa Goa. There was no investment banker from Sesa’s side.
A Dempo official said proceeds from the deal may go into Dempo’s other subsidiary, Goa Carbon, which is a leading Indian petcoke calciner with a total capacity of 2,40,000 tonnes per annum. It has three calcination plants, in southern Goa, Bilaspur in Chattisgarh and at Paradeep in Orissa. The Bilaspur and Paradeep plants were acquired in 1999 and 2001, respectively.
The Dempo group has mines and mining rights to about 70 million tonnes of iron ore reserves in Goa. The mining assets of the company include processing plants, barges, jetties, transhippers and loading capacities at Mormugao port.
Sesa Goa, which has iron ore reserves of 200 million tonnes, said in the statement that VSD is a logical and strategic fit with its existing iron ore business and is expected to create significant long-term value for all shareholders.
VSD produced 3.94 million tonnes of iron ore and sold 4.36 million tonnes last fiscal. The company is one of the largest exporters of iron ore from Goa.
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