OREANDA-NEWS. February 27, 2012. Sterlite Industries (India) Ltd (Sterlite together with its subsidiaries), Sesa Goa Ltd (Sesa Goa together with its subsidiaries) and Vedanta Resources Plc (Vedanta together with its subsidiaries, the Group) announced a recommended merger of Sesa Goa and Sterlite and the proposed consolidation and simplification of the Group structure.

Transaction highlights

•           Merger of Sterlite into Sesa Goa (proposed new name Sesa Sterlite), 3 Sesa Goa shares to be issued for every 5 existing Sterlite shares

•           Vedanta Aluminium Ltd (VAL) and The Madras Aluminium Company Ltd (MALCO) to be 100% consolidated into Sesa Sterlite

•           Transfer of Vedanta's direct holding of 38.8% in Cairn India Limited (Cairn India) to Sesa Goa, together with the associated debt of USD 5.9 billion, at cost. Post the transfer, Sesa Sterlite will have a 58.9% shareholding in Cairn India

Creating Sesa Sterlite, a global diversified natural resources major

•           Creation of Sesa Sterlite: India's natural resources champion and expected to be seventh largest global diversified natural resources major by EBITDA

•           World-class, low cost assets in close proximity to high-growth markets

•           Growth capital largely invested, capacity expected to double in the next three years

•           Greater scale and diversification reduces volatility of earnings for Sesa Sterlite

•           Cash generative business supported by a strong balance sheet

•           Sesa Sterlite will be listed in India, with American Depositary Shares (ADS) listed on the New York Stock Exchange (NYSE)

Consolidating and simplifying the Group structure in line with stated strategy

•           Significant synergies expected - generating cost savings c.INR 1,000 crore (c.USD 200 million) per annum

•           Earnings accretive for Sesa Goa, Sterlite and Vedanta shareholders immediately post completion

•           Post consolidation Vedanta will own a 58.3% shareholding in Sesa Sterlite

•           The Group's 79.4% shareholding in Konkola Copper Mines Plc (KCM) will continue to be directly held by Vedanta

Anil Agarwal, Chairman of Vedanta, said:

Sesa Sterlite will be one of the largest global diversified natural resources majors, supporting country's industrial growth. This transaction is a natural evolution, leading to simplification of the Group's structure. Sesa Sterlite will be the principal operating company in the group and with its high quality assets, growth projects and strong management, it is well placed to create value for all shareholders.

M.S. Mehta, Group CEO, said:

This consolidation will create value for all shareholders. It will lead to a simpler and more efficient structure and will facilitate more flexible allocation of capital. Our shareholders will benefit from unparalleled growth across metals, mining and oil & gas, besides, the increased synergy.

P.K. Mukherjee, Managing Director of Sesa Goa, said:

This is a positive and big step forward for Sesa Goa. In addition to being part of a much larger group with an increasingly global shareholder base, we will benefit from diversification, whilst increased scale will reduce volatility of earnings and cash flows through the commodity cycle. This will support our growth strategy and also enable us to benefit from the attractive growth projects in oil & gas, zinc- lead-silver, aluminium and power within the Group.

Transaction Rationale

The consolidation is expected to create the world's seventh largest global diversified natural resources major by EBITDA. Sesa Sterlite is expected to have a world-class, low cost asset base in close proximity to high growth markets. Increased diversification is expected to reduce volatility of earnings through commodity cycles, lowering the cost of capital and enhancing value.

The consolidation and simplification of the Group structure is consistent with the Group's strategy. The elimination of cross holdings is expected to benefit the Group through superior capital structure, increased flexibility to allocate capital, broader access to capital markets and enhanced visibility of earnings and cashflow.

The consolidation is expected to lead to significant operational, capital and corporate synergies, including economies of scale, leveraging technical expertise, more efficient movement of Group cash, improved allocation of capital and corporate cost savings including tax efficiencies.

These synergies are expected to generate cost savings of c.INR 1,000 crore (c.USD 200 million) per annum. The consolidation is expected to be earnings accretive to Sesa Goa, Sterlite and Vedanta shareholders immediately post completion.