Sesa Goa buys Dempo’s mining biz

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India Inc seems to have regained its appetite for mergers and acquisitions. In the second-largest acquisition in India’s iron ore industry, Sesa Goa, a subsidiary of London-listed Vedanta Resources, today acquired Goa-based Dempo group’s mining and maritime businesses for Rs 1,750 crore in an all-cash deal.

The assets sold include mining leases, mining rights, and related infrastructure in Goa. The acquisition will give Sesa Goa access to Dempo’s 70 million tonne of iron ore mineable resources in Goa. The transaction has been funded by Sesa Goa from its cash resources of Rs 4,143 crore.

Dempo has mining leases over 1,800 hectares in Goa. The mining assets include processing plants, barges, jetties, transhippers and loading capacities at Mormugoa port. The company produced 3.94 million tonne of iron ore and sold 4.36 million tonne in the year ended March 31, 2009.

Analysts said the acquisition of V S Dempo & Co. Private Limited (VSD) was a logical and strategic fit with Sesa’s existing iron ore business and was expected to create significant long-term value for all shareholders through the synergy. Ambit Corporate Finance acted as financial advisors in the transaction.

Sesa Goa and Dempo Group have signed a definitive share purchase agreement under which the former has acquired all the outstanding common shares of VSD, which in turn, also holds 100 per cent of Dempo Mining Corporation Pvt Ltd and 50 per cent equity shares of Goa Maritime Pvt Ltd.

The cost of mining iron ore ranges from $8 to $16 per tonne, but rail transportation to the port can be as high as $30. The industry has been lobbying for lower rail freight charges. “We are highly delighted with this opportunity to consolidate our iron ore business. The integration of Sesa and VSD’s operations will achieve great synergy,” said Anil Agarwal, Chairman of Vedanta group. “We are extremely pleased to have reached this agreement with Sesa, which will ensure long-term sustenance of VSD’s operations,” said Shrinivas V Dempo, Chairman and Managing Director, Dempo Group.

Courtesy: BS

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