Vedanta chairman's family trust offers to buy rest of company

Vedanta Resources Plc said on Monday chairman Anil Agarwal's family trust has agreed to buy the rest of Vedanta in a deal that values the mining conglomerate at 2.3 billion pounds ($3.03 billion).

Volcan Investments, a trust operated by Vedanta Group chairman Anil Agarwal’s family, has offered to pay 825 pence per Vedanta share, which represents a 27.6 per cent premium to the London listed stock's closing price on Friday of 646.8 pence.

On Monday, however, the stock rose as much as 171.20 pence (or 26.468 per cent) from its Friday’s close

The move follows pressure on the company by environmental activists and Britain’s Labour Party for delisting the company from LSE in the wake of the events in Thoothukudi involving its copper smelter, although the company sought to portray the development as a “natural progression.”

An independent committee of Vedanta’s board of directors 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 Vedanta's shareholders.

Investors would also receive the 41 US cents per share dividend for the year ended in March.

Volcan, the holding company wholly-owned by Anil Agarwal’s discretionary trust, currently holds about 66.53 per cent of Vedanta. If the offer to independent shareholders is accepted, the firm’s delisting could follow within 20 business days from that date.

Simultaneously, Vedanta would make an application to delist its shares from the London Stock Exchange (LSE) and from the Financial Conduct Authority’s list.

In addition to the offer price, shareholders will also be entitled to receive a previously announced dividend of 41 cents per Vedanta share, the company said, adding that this would boost the offer price to 856 pence per share.

Vedanta has come under increased scrutiny in India since police opened fire on protesters, killing 13, at a demonstration against a copper smelter in May. The smelter has since been shut down (See: TN orders closure of Sterlite's copper smelter in Thoothukudi). 

“The London listing has served us extremely well since…. 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,” Anil Agarwal stated in a release.

The independent committee — which was formed to consider the investment — said it would be recommending the cash offer because of the certainty it provided and attractive valuation. The move would also help simplify Vedanta’s structure, in the wake of other such moves, including the merger of various Indian subsidiaries into Vedanta Limited and the merger of Cairn India Limited into Vedanta Limited. “Volcan believes that now is the right time to take another important step in simplifying the structure of the Vedanta Group by removing a duplicate stock exchange listing, which it believes to be in the best interests of all stakeholders.”

Pressure has built on Vedanta Resources in recent months in London, particularly following the killing of protesters in police firing in Thoothuthukudi in May. Britain’s opposition Labour party called for the company to be delisted from the London Stock exchange to “remove its cloak of respectability.” 

The company has in the past faced concerns from some investors such as the Church of England, which in 2010 sold its stake in the company, citing its “respect for human rights and local communities.”

The company is also facing legal challenges in Britain. Zambian villagers last year won the right to sue Vedanta Resources in London, though the company is appealing this ruling.