Vedanta bags Mitsui’s 51% in miner Sesa Goa

UK-listed mining company Vedanta Resources, promoted by maverick NRI business tycoon Anil Agarwal, has bought Japanese trading multinational Mitsui & Co Ltd's 51 per cent stake in India's top private sector iron ore exporter Sesa Goa Ltd for $981 million in cash. Vedanta, which outbid the world top steel producer Arcelor Mittal and the number three Aditya Birla Group, said it is launching an open offer for a further 20 per cent of Sesa Goa at the same price (Rs 2,036 a share). This would bring the total cost of the deal to $1.37 billion.

Vedanta said that it would pay for the deal with $1.1 billion of new bank debt facilities, as well as existing cash resources. It expects to complete the open offer by July 2007. Nomura advised Vedanta on the deal. The deal marks Vedanta's entry into the lucrative iron ore market, adding to its existing strengths in aluminium, copper and zinc. Sesa Goa currently sells about 10 million tonnes of iron ore a year and made a pre-tax profit of $193.8 million in the year to March 2006. Iron ore has been in strong demand in recent years as the rapid growth in China and India has fuelled a surge in global steel production.

Reacting to the news, shares in Sesa Goa fell 3 per cent to Rs 1,690 on the Bombay Stock Exchange (BSE). Anagram Stock Broking head of research V K Sharma said that Sesa Goa shares were down because only about 40 per cent of freely floated shares could participate in Vedanta's open offer, which is 16.9 percent above Monday's closing price. Vedanta deputy chairman and Anil Agarwal's brother Navin told reporters in London that by the Indian takeover rules, his firm was required to launch an open offer for at least a further 20 per cent of Sesa Goa shares. He, however, declined to say whether Vedanta would eventually seek to raise its stake beyond 71 per cent.

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