Vedanta Resources Plc agreed to buy Mitsui & Co.'s entire stake in Indian iron-ore exporter Sesa Goa Ltd. for $981 million, trouncing rivals including Arcelor Mittal to secure supplies of the steel-making raw material.
Vedanta, the biggest producer of copper and zinc in India, will pay 2,036 rupees ($49) per share for a 51 percent stake, the London-based company said today. Vedanta will offer to buy a further 20 percent for at least the same price. Adviser Nomura Holdings Inc. will lend $1.1 billion to fund the takeover.
Chairman Anil Agarwal beat two fellow Indian billionaires, Lakshmi Mittal and Kumar Mangalam Birla, to secure supplies of iron ore as demand from China drives iron-ore prices to records. Anglo American Plc yesterday agreed to pay $1.5 billion for about half of a Brazilian iron-ore project.
``The name of the game is procurement of raw materials,'' Michael Skinner, a London-based analyst at Standard Bank Plc, said by phone from Dubai. ``Vedanta will look for an integrated model and wants to start right at the beginning. Everybody is looking for raw materials.''
Competition for Sesa Goa drove its shares to a record 2,000 rupees on Jan. 29. Vedanta is paying 31 percent more than the stock's six-month daily average to get its first iron ore mine in India, where demand for steel is growing at almost twice the global average fuelled by economic growth of more than 8 percent.
Sesa Goa shares gained as much as 9 percent to 1,900 rupees today and traded at 1,708 rupees at 10:10 a.m. Mumbai time.
`Pure Metal'
Sesa Goa may help shield Vedanta's earnings from volatility in metal prices. Copper reached a record $8,800 a ton in May and fell 28 percent from the peak through Dec. 31, 2006. Prices have gained 26 percent this year. Zinc fell 27 percent between Jan. 1 and Feb. 2, before recovering 21 percent since. Iron ore prices, set in annual contracts, have risen to a record and could stay at highs till 2013, Credit Suisse said in an April 13 report.
``Vedanta probably wants to balance the volatility in its metals basket by adding iron ore,'' said Niraj Shah, an analyst at Prabhudas Lilladher Pvt., a Mumbai-based brokerage. ``It doesn't want to be a pure metals company.''
Baosteel Group Corp., China's biggest steelmaker, will need to buy 90 percent more iron ore a year by 2012 when it plans to more than double output. Baosteel, which used 42 million tons of ore in 2006, will need 80 million tons to meet the output target, Li Qingyu, chief executive of Shanghai-based Baosteel Trading Co., said in slides prepared for a conference in Beijing today.
Lakshmi Mittal, who plans to spend $9 billion on a venture in India, said Feb. 21 that he is considering bidding for the iron-ore miner. Aditya Birla Group's Essel Mining & Industries Ltd. had also bid for the iron-ore mining company.
Open Offer
Vedanta acquired all of Mitsui's Finsider International Ltd., which owns the holding. The company said 71 percent of Sesa Goa will cost $1.37 billion.
The offer to buy shares from investors will run for three months, the company said in a statement. Under Indian law, a company buying more than 20 percent of another company must make an offer to acquire a further 20 percent of its shares.
Chairman Agarwal will brief reporters today in Mumbai. He is the largest shareholder with 54 percent stake. Vedanta also operates plants in Zambia and Australia.
Founded in 1954, Sesa Goa has iron-ore mines in the states of Goa, Karnataka and Orissa, and sold 9.6 million tons in the year ended March 2006, according to its Web site.
Mitsui invested in October 1996. The company expects to get an after-tax gain of 50 billion yen ($422 million) from the sale, it said in a statement today.
Morgan Stanley advised Mitsui on the sale.
To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net .
Your Ads At Here
