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Mitsui sells Seas Goa stake to Vendata Resources

Steel News - Published on Wed, 25 Apr 2007

Mitsui & Co Ltd announced that its Earlyguard Ltd has sold 100% of Finsider International Co Ltd, which holds a 51% stake in Sesa Goa Ltd, to Vendata Resources Plc’s wholly owned subsidiaries Richter Holding Ltd and Westglobe Ltd for USD 981 million. Although the structure of the deal was not available, sources said the company has tied up a debt amounting to USD 1.1 billon while the balance would be through internal sources.

Vedanta will pay INR 2,036 (USD 49) per share for a 51% stake, which is 17% more than yesterday's closing price. The initial bids from the suitors were in the region of INR 2,200 and INR 2,500 per share but were lowered after the budget announcement of INR 300 export tax on iron ore.

Vedanta will offer to buy a further 20% for at least the same price. The offer to buy shares from investors will run for three months. Under Indian law, a company buying more than 20% of another company must make an offer to acquire a further 20% of its shares.

Several foreign and domestic metal and mining companies have been reported to have shown interest in acquiring stake in Sesa Goa and the list included Arcelor Mittal, BHP Billiton, CVRD, Rio Tinto, Vedanta Group, Essel Mining and JSW Steel.

Founded in 1954, Sesa Goa has iron ore mines in the states of Goa, Karnataka and Orissa, and sold 9.6 million tons in 2005-06 and made a pretax profit of USD 193.8 million. Sesa Goa has extractable reserves of over 150 million tonne of iron ore located in Goa, Karnataka and Orissa, which can be expanded.

Mr Anil Agawal chairman of Vedanta said that there are no plans to delist Sesa Goa. He said "Sesa is a natural fit for Vedanta; it is an efficient, low cost miner with growth opportunities in one of the world's fastest growing economies. This transaction is immediately earnings and cash flow accretive and we believe it will create significant long term value for all our stakeholders."

This transaction is in line with Mitsui's corporate strategy under the current medium term management outlook in which Mitsui has been reviewing its portfolio to create shareholder value. Mistui said in a statement that the sale would generate CNY 50 billion (USD 423 million) in profit and that it would use the proceeds to invest in other natural resources. Mitsui invested in Seas Goa in October 1996.

Vedanta’s principal operations are in India, and it has ventures in Zambia, Australia and Armenia. It produces aluminum, copper, zinc, lead and gold. The move is significant for Vedanta, which until now focuses all its energies on non ferrous metals.

Morgan Stanley advised Mitsui on the sale and Nomura advised Vedanta on the deal.
Posted By : admin on Wed, 25 Apr 2007
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