Impact of Vedanta AcquisitionImpact of Vedanta AcquisitionIn 2008 Vedanta Resources Plc agreed to buy Mitsui & Co.s entire stake in Indian iron-ore exporter Sesa Goa Ltd. for $981 million, beating rivals including Arcelor Mittal to secure supplies of the steel-making raw material.
Vedanta is the biggest producer of copper and zinc in India and paid Rs. 2,036 ($49) per share for a 51% stake, the London-based company said today. Vedanta offered to buy a further 20% for at least the same price.
Chairman Anil Agarwal beat two fellow Indian billionaires, Lakshmi Mittal and Kumar Mangalam Birla, to secure supplies of iron ore China needs to fuel its economic boom.
Competition for Sesa Goa drove its shares to a record Rs. 2,000 on 29 January, valuing the miner at $1.8 billion. Vedanta has most of its operations in India, where steel demand is forecast to rise 7.7% a year from 2010 to 2015, faster than the 4.2 % growth globally, according to the International Iron and Steel Institute.
Vedanta believes this acquisition will create significant long term value for all stakeholders through:The creation of Indias largest diversified mining group, with leading market positions in aluminium, copper, zinc and iron ore together with an industry leading pipeline of expansion projects.
An ideal position to capitalise on Indias huge iron ore reserves, the worlds third largest.Access to long life, low cost, cash generative assets.Excellent debottlenecking/expansion opportunities at a low cost to significantly increase production of iron ore and pig iron by leveraging Vedantas proven mining and project management skills.
Longer term organic growth opportunities to increase production and resources by utilising existing and accessing additional prospecting and mining licences.
Optionality to participate in industry consolidation in Indias highly fragmented iron ore industry.Vedanta Crain DealOn 16 August 2010, Vedanta announced its proposal to acquire 51 per cent. to 60 per cent. of the fullydiluted share capital of Cairn India for a total consideration of up to US$9.6 billion. Cairn India is asubsidiary of Cairn Energy PLC (‘‘Cairn Energy) and is the fourth largest oil and gas company in India asat 1 January 2010. The Board believes that the Acquisition will further establish Vedantas position as an Indian national resources champion and give Vedanta a comprehensive footprint across Indias resourcessector.As described in more detail in paragraph 3 of this letter, the Acquisition comprises three separate transactions, namely the purchase from the Cairn Energy Group of Cairn India Shares pursuant
, the establishment as a non-state-owned company of a subsidiary of Cairn Power India Limited that intends to manufacture its own nuclear power capacity, and the acquisition of Cairn Power India shares pursuant
into a merged entity, with or without an investment with, Cairn Power India Limited. The Acquisition will be carried out in full view of the current management and management team; and after consultation with the relevant authorities, the Board believes that Cairn’s ability to participate as a wholly owned company will be enhanced and has taken steps to promote participation by all stakeholders, particularly the Indian media industry.Cairn will take into consideration its economic and environmental obligations. Its investment will be based on cost of supply, availability in supply, and cost of the integrated and integrated technology required to ensure that the Cairn reactors and operating facilities at this site are of high quality and reliability. Cairn will also benefit from a more global approach in this regard as compared to many other Indian companies, as indicated by: (1) its strategic focus on promoting the development, production and distribution of non-energy domestic nuclear power (NSNG) and liquefied natural gas for a sustained period; (2) its focus on sustainable industrial development and in the process create synergistic relationships with existing industry and governments, particularly the Indian Central Bank (ICB) and the Indian Energy Regulatory Authority, and will ensure the success of such projects by creating in-house knowledge and development capabilities necessary to help develop renewable energy technologies.Cairn should have a high priority as to providing an environment to make possible the use of the Cairn facilities and resources, of which it has been the beneficiary in both fiscal 2013 and 2013, of nuclear power generation. In contrast to other countries in Europe, where the capacity of Cairn is lower, we have seen that it is becoming increasingly necessary for international investment in nuclear power generation. We have taken measures to further support the high viability of Cairn’s nuclear reactor and nuclear generating plant of a future that has implications for both European and Canadian nuclear power plants. The acquisition of Kona Nucleum Nuclear Energy Power Plant Limited is of great advantage to our customers. Kona Nucleum provides a high level of services and a competitive advantage, especially in this respect, as well as to the customers of other partners, both nuclear and natural gas. We anticipate that the acquisition will further enhance and attract customers on a global basis to the Cairn facilities.Cairn Power India will be engaged in the establishment of the Cairn Nuclear Power plant facility in Cairn National Park to operate a large volume of domestic and offshore nuclear power capacity. By establishing and operating the plant, Indian nuclear power industry will be able to enhance the environmental sustainability of the energy supplied to the two reactors and nuclear power reactors at Cairn national park. The two Indian nuclear reactors at Cairn National Park will have combined generation capacity of more than two gigawatts. These will provide better performance and higher operating costs. Cairn will offer excellent customer service and efficiency. The Cairn Nuclear Power Plant facility will not be a permanent installation site, but rather serves as a facility, with its own water treatment