Sesa Goa merges with Sterlite

They also okayed the issue of 3 Sesa Goa shares for every 5 existing Sterlite shares. Simultaneously,two other group companies Vedanta Aluminium Ltd VAL and Madras Aluminium Company Ltd MALCO will be consolidated into Sesa Sterlite.

Post consolidation,Vedanta will own a 58.3 per cent shareholding in Sesa Sterlite. Vedanta will also transfer its 38.8 per cent direct shareholding in Cairn India to a wholly-owned subsidiary of Sesa Goa at a nominal consideration of one dollar,together with the associated acquisition debt of 5.9 billion through the transfer of companies in which such debt and shareholdings are held.

The debt will continue to be guaranteed by Vedanta. This transfer is not inter-conditional on the merger of Sesa, Sterlite,MALCO and VAL, Vedanta said.

After the transfer,Sesa Sterlite will have a 58.9 per cent shareholding in Cairn India. The groups 79.4 per cent shareholding in Konkola Copper Mines Plc will continue to be directly held by Vedanta.

Addressing a press conference in Mumbai,Anil Agarwal,Chairman of Vedanta,said: This transaction is a natural evolution,leading to simplification of the groups 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.

PK Mukherjee,managing director of Sesa Goa,said: In addition to being part of a much larger group with an increasingly global shareholder base,we will benefit from diversification,whilst increased scale will reduce volatility of earnings and cash flows through the commodity cycle.

The consolidation is expected to create the worlds seventh largest global diversified natural resources major by EBITDA earnings before interest,tax,depreciation and amortisation.

The elimination of cross holdings is expected to benefit the group through superior capital structure,increased flexibility to allocate capital,broader access to capital markets and enhanced visibility of earnings and cashflow, Group Director- Finance Tarun Jain said.

The consolidation is expected to lead to significant operational,capital and corporate synergies,generating cost savings of Rs 1,000 crore per annum.

It is also expected to be earnings accretive to Sesa Goa,Sterlite and Vedanta shareholders immediately post completion.

In the 12 months to December 2011,Sesa Sterlite would have generated revenues of Rs 66,431 crore 14.2 billion and EBITDA of Rs 24,953 crore 5.3 billion,combined with a strong balance sheet with net debt of Rs 36,936 crore.