Following weeks of speculation, Vedanta Resources has confirmed that it will be merging its Indian iron ore and copper divisions, Sesa Goa and Sterlite, respectively, to create a new multi-metal mining giant - Sesa Sterlite.
The combination is expected to create India's natural resources "champion" and is anticipated to be the world's seventh-largest global diversified natural resources major on an EBITDA (earnings before interest, tax , depreciation and amortisation) basis.
Vedanta expects "significant synergies" from the tie-up, including costs savings of INR 1,000 crore, or $200m, per annum.
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"Sesa Sterlite will be one of the largest global diversified natural resources majors, supporting country's industrial growth," said Vedanta's Chairman Anil Agarway.
"This transaction is a natural evolution, leading to simplification of the group's structure. 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," he said.
As part of the deal, three Sesa Goa shares will be issued for every five existing Sterlite shares and the group will see Vedanta Aluminium and The Madras Aluminium 100% consolidated into the new entity.
Also, Vedanta's 38.8% stake in Cairn India will be transferred to Sesa Goa, together with the associated debt of $5.9bn. After the transfer, Sesa Sterlite will have a 58.9% interest in Cairn India. Vedanta will own a 58.3% shareholding in Sesa Sterlite.
Sesa Sterlite will be listed in India and also have American Depositary Shares (ADSs) listed in New York.
BC
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