Metal giant Vedanta Resources Plc on Friday launched a $1-billion convertible bond issue to finance takeovers and expansion and to boost ownership of subsidiaries. The move comes a day after Vedanta subsidiary Sesa Goa announced a Rs 1,750-crore acquisition of VS Dempo & Company?s mining assets in Goa in an all-cash deal.
?The company intends to use the net proceeds of the (bond) offering to support its organic growth pipeline, to increase its ownership interest in its subsidiaries and for general corporate purposes. The net proceeds will also provide the group with additional flexibility to finance acquisitions,? Vedanta said in a statement.
The issue of convertible bonds, due 2016, may be increased by up to $250 million through an option granted to JP Morgan, the sole book-runner of the offering.
The bonds are expected to have a coupon of 4.5% to 5.5%, payable semi-annually in arrears, and will be convertible into fully paid ordinary shares of $0.10. The conversion could be at 35-45% premium to the volume-weighted average price of the ordinary shares on the London Stock Exchange between the launch and conversion.
Further, Vedanta will also invest $120 million to boost its stake in Sesa Goa Ltd to 55% from 53.1% now, it said in a separate statement on Friday.
Under the preferential share offer, Vedanta will subscribe to an additional 33,274,000 equity shares of Re 1 face value each.
The proposed transaction is subject to the approval of Sesa Goa?s shareholders and is expected to be completed by July 2009, it added.
Sesa Goa?s shares on Friday surged 5.62% on the Bombay stock Exchange to Rs 202.90.
Vedanta is still seeking stakes in government-controlled Balco and Hindustan Zinc Ltd. The Union government owns 49 % in Balco and 27% in Hindustan Zinc.
Vedanta?s capital requirement till 2012 is about $7.9 billion, of which it requires $1.3 billion for minority buyouts.