Sterlite and Sesa Goa to merge

Vedanta group companies Sterlite Industries and Sesa Goa announced a merger of Sesa Goa and Sterlite on Saturday.

As per the plan, the Sterlite will merge into Sesa Goa, which will be called Sesa Sterlite. Three shares of Sesa Goa will be issued for every five Sterlite shares.

Vedanta Aluminium and Madras Aluminium will be 100% consolidated into Sesa Sterlite.

Vedanta’s direct holding of 38.8% in Cairn India will be transferred to Sesa Goa, together with the associated debt of $5.9 billion, at cost. After the transfer, Sesa Sterlite will have a 58.9% shareholding in Cairn India.

The new firm will be the seventh largest global diversified natural resources major by earnings before interest, tax and depreciation. Anil Agarwal, Vedanta chairman, said, “Sesa Sterlite will be one of the largest global diversified natural resources majors, supporting the country’s industrial growth. 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.”

The group also plans to double capacity in the next three years. The management also said the new firm will have greater scale and diversification reduces volatility of earnings for Sesa Sterlite. The press release said increased diversification would reduce volatility of earnings through commodity cycles, lowering the cost of capital and enhancing value.

The press release also said there would be significant synergies from the merger, and there would be cost savings of around 1,000 crore a year.

After the consolidation, Vedanta will own 58.3% in Sesa Sterlite. The group’s 79.4% shareholding in Konkola Copper Mines will continue to be directly held by Vedanta.