The mining mogul offers $1 billion to buy out 33.5% non-promoter shareholders.
Amid rising protests in the UK following the death of 13 people in May during violent demonstrations against its copper smelter in Tuticorin, Tamil Nadu, Anil Agarwal has decided to delist his flagship firm Vedanta Resources from the London Stock Exchange after buying out 33.5% of non-promoter shareholders for about $1 billion.
The company said in a filing that Agarwal’s Volcan Investments, which currently holds 66.53% of Vedanta, has made a cash offer for 825 pence a share, a 14% premium to the company’s three-month weighted average price.
The company said it will recommend acceptance of the offer by the shareholders, who would also be entitled to a previously announced dividend of $0.41 per share.
Though the company said that it no longer sees the London listing as necessary to access capital and the deal will simplify Vedanta’s corporate structure, analysts said the move has come after the killing of 13 protesters in police firing at its copper smelter plant in Tamil Nadu, which led to political protests in the UK, also leading to a drop in its share prices.
UK’s main Opposition, the Labour Party had called for delisting of Vedanta Resources from the LSE to prevent reputational damage from the “rogue” company, which has been operating “illegal” mining concerns for years.
However, in response to an e-mail query from FE, Agarwal said there is no link between the protests and the proposal to delist. “This is driven by the desire to simplify the corporate structure,” he said. He further explained a two-fold rationale behind the move: 1. corporate simplification and 2. Increasing maturity of the Indian markets.
“We have been simplifying for years, through the merger of the Indian companies to create Vedanta Ltd, and then the merger of Cairn India into Vedanta Ltd. This transaction is a logical next step in that process,” Agarwal told FE while explaining the first rationale. Regarding the second, he said, “The liquidity of Indian markets now means that the need for a separate London listing is no longer critical”.
Vedanta Resources owns 50.1% of Vedanta Ltd which has presence in businesses like oil and gas, zinc, coper, silver, lead, iron ore, aluminium mining through companies like Cairn, Sesa Sterlite, and Hindustan Zinc. Vedanta resources also owns 79.4% of Konkona Copper Minies in Zambia, Africa.
Once Vedanta Resources gets delisted, Agarwal would have just two listed companies in India — Vedanta Ltd under which the copper, silver, lead, iron ore, power, aluminum mining and oil and gas business are housed, and Hindustan Zinc.
The delisting will take two-three months as it will have to make a firm offer in 28 days.
Vedanta said an independent committee, formed to review and evaluate the proposal, has indicated to Volcan Investments that it supports the offer and intends to recommend a firm offer to the shareholders.
Agarwal said that Vedanta was the first Indian company to be listed on the London Stock Exchange in 2003. “The London listing has served us extremely well since that time. However, given the subsequent growth of our underlying businesses and the maturity of the Indian capital markets, together with related feedback from our shareholders and other stakeholders, we have concluded that a separate London listing is no longer necessary to achieve the Vedanta Group’s strategic objectives. In taking this important step towards greater group simplification, we wanted to ensure that the independent shareholders of Vedanta Resources Plc were provided with the opportunity to exit on attractive terms, and I believe this possible offer will deliver on that objective,” he said.
Vedanta said the offer price of 825 pence per share values the company at 2,325 million pounds and is 27.6% higher than Friday’s closing price of 647 pence a share.
Commenting on the possible offer, Deepak Parekh, senior independent director of Vedanta, said: “Since being approached, the independent directors of Vedanta Resources Plc have evaluated the possible offer and have negotiated its terms. We are now pleased to confirm our intention to recommend the possible offer to Vedanta’s independent shareholders if and when it is formally made in the terms announced today”.