NRI billionaire Anil Agarwal-promoted Vedanta Resources plc has acquired the zinc assets of $670-million global mining firm Anglo American plc for $1.34 billion (around Rs 6,030 crore). The all-cash deal, which will make Vedanta Resources plc the world?s largest zinc producer, will increase its zinc and lead production capacity by 37%, from 1,064 ktpa to 1,462 ktpa.
The deal, being funded through Vedanta?s $7.2 billion cash pile, will give it a 11% share of the global zinc market, increasing its total reserves and resources by 76%.
?These high quality assets complement Vedanta?s existing portfolio, creating the largest zinc and lead producer in the world,? said Agarwal, who is the Vedanta chairman.
The transaction is expected to be immediately earnings accretive. Anglo?s zinc assets posted gross revenue of $670 million in 2009 and reported an ebitda of $213 million, the company said.
Vedanta will also buy Anglo American?s other assets, including the Skorpion mine in Namibia, the Lisheen mine in Ireland and a 74% stake in Black Mountain Mining in South Africa, which includes the black mountain mine and Gamsberg project in South Africa. Of the total consideration, $698 million relates to the Skorpion mine, $308 million to the Lisheen mine, and $332 million relates to Anglo American?s 74% interest in Black Mountain Mining.
Vedanta intends to undertake the acquisition through its group company, Hindustan Zinc Ltd (HZL). However, the approval from the HZL board is yet to be taken. The economic ownership will be transferred from January 1, 2010. The entire deal is expected to take about 12 months for its closure.
Naveen Agarwal, vice-chairman of Vedanta said, ?Vedanta had cash equivalents and liquid investments of $7.2 billion as on March 31, 2010, and HZL?s cash balance as on March 2010 includes about $2.5 billion,? he said during a conference call on Monday.
According to him, Anglo Zinc is an excellent operational and strategic fit with Vedanta?s existing zinc business and will create significant long term value for Vedanta shareholders. Moreover, the acquisition will give Vedanta a greater presence in Africa and Europe. The valuation is done taking into consideration the long term pricing view of zinc, i.e, 3-3.5 times EV to Ebidta.
?The deal will make sense for Vedanta when the undeveloped mines are scaled up fast and at the same time, the huge cash pile is put to use rather than remains idle,? said an analyst, requesting anonymity.
Reacting to the development, HZL shares on Monday closed at Rs 1,119.30, up 3.61% from the previous day?s close on the Bombay Stock Exchange.
Anglo American announced the sale of its zinc assets in October last year as it sought to focus on assets such as copper and iron ore that are in demand in fast-growing economies in Asia.
