Bidders to decide Sesa Goa fate on Wednesday

Japanese company Mitsui & Co has set a deadline for the submission of the final bid for its majority stake in the country's second largest iron ore exporter Sesa Goa on Wednesday.

Sources close to the development said four bidders""the world's largest steelmaker Arcelor Mittal, Brazilain miner CVRD, Aditya Birla group's closely-held firm Essel Mining and the Anil Agarwal-controlled Vedanta "" have completed the plant visit. They will submit their final bids to the advisor to the sale, Morgan Stanley.

At today's close of Rs 1,762 a share, which is 3.58 per cent higher than the previous close, the company is valued at Rs 3,118 crore. The winning bidder will thus have to cough up at least Rs 2,213 crore for the acquisition of the promoters' 51 per cent stake and the subsequent 20 per cent open offer. It is expected that the successful bidder will pay a premium over the market rate.

The sources said the foreign players are keen to enter the country and may go for aggressive bidding for Sesa Goa, which exports iron ore to China, Japan, Europe and Taiwan, from its mines in Goa, Karnataka and Orissa.

It has a reported reserve of 150 million tonne. These four were chosen out of six companies which had submitted their preliminary bids on February 19. The two who withdrew from the race for Sesa Goa were world's second largest mining and natural resources company Anglo American and Brazil's mining firm Rio Tinto.

Mitui & Co would have fetched a better premium for its controlling stake had there been no export duty on iron ore. The Union Budget levied duty of Rs 300 per tonne of export.

In fact, the stock was going up before the export duty was imposed on February 28. The stock reached its 52-week high of Rs 2025 on February 27.

Analysts say the levy of the tax on overseas sales of iron ore would hit the company's earnings by 20-25 per cent in next year. The levy will cut Sesa's 2008 earnings to Rs 161 a share, CLSA Asia Pacific Markets wrote in a note immediately after the budget. That's 24 per cent below the brokerage's previous estimate.

This will bring Mitsui & Co's 10-year association with Sesa Goa to an end. Institutional investors hold 29.8 per cent while the public holds 14.72 per cent.

The company posted a net income of Rs 1697 crore and net profit of Rs 531 crore in the year ended March 31, 2006. Earnings per share were Rs 134.99 last year. Founded in 1954, Sesa Goa sells a one-tenth of its 9.6-million tonne output in Japan and 58 percent to customers in China and Taiwan.