Vote against Sesa-Sterlite merger: IIAS to shareholders

Ahead of the court-convened meeting to consider the Sesa-Sterlite merger on June 21, advisory firm IIAS has recommended stakeholders of both firms to vote against the merger which was announced by parent company, Vedanta Resources in February this year.

These are IIAS’s recommendations to shareholders on why they should vote against the merger. (Click here to read IIAS report on the Sesa-Sterlite merger.)

The leverage of the new entity will be high as compared to Sesa Goa and Sterlite pre merger, thereby making the deal unfavorable for Sesa Goa and Sterlite shareholders.

 Premium valuation will be accorded to Vedanta Aluminium (VAL)Premium valuation will be accorded to loss making VAL which will become the subsidiary  Sesa-Sterlite post the merger  but will be  assigned an equity value of 4.7 times its EBIDTA. This is in line with Sesa Goa and higher than for Sterlite (4.3 times).

 Operational hurdles in VAL

VAL’s mining assets are locked in disputes and litigations with the Indian government. According to the firm, the consolidation of VAL with Sesa Goa and Sterlite would be favourable to minority shareholders after the necessary clearances and mining approvals have been obtained.