Vedanta Resources is plotting one of the biggest money-spinning corporate break-ups of a Ftse 100 company in years. The Agarwal family, which has a majority stake in the India-based miner, is considering a spin-off of several of its interests, resulting in five or six companies plus a parent. Vedanta would retain controlling interests in them all, but each would be separately listed.
A number of leading mining bankers in London have been asked to examine plans for the listings. For example, Vedanta wants a copper flotation to value the new business at $10bn, even though the overall company's market valuation is only $10.6bn.
"Vedanta is looking at its structure, trying to find a way to unlock value," said one banker. By simplifying the businesses – so that various minor shareholdings are consolidated – they can be more easily valued in the market, resulting in a higher value overall.
Vedanta, chaired by Anil Agarwal, is a complicated mining conglomerate, with interests in aluminium, power and zinc. "The company is all over the place, with some assets here and others there," said another banker. "Some of the listings might happen this year. They will be 'verticals' [specialising in certain areas], a full-scale re-organisation. They are all of sufficient size that each business could attract enough capital to grow."
Banks are debating where the listings should end up. Most will be of a size that would place them on "the cusp of the Ftse 100" claimed one source – though the spin-offs could not place there as the ultimate parent is a Ftse 100 company.
Some potential advisers believe that most of the listings will end up in India and Hong Kong, the latter following the recent flotation of Russia's aluminium behemoth United Company Rusal. However, some advisers have told Vedanta that London would be a suitable location for some spin-offs.
A formal decision on the move is "imminent" according to one industry source, though some believe that rejecting what is, in effect, the conglomerate model will mean that the spin-offs are not protected against sudden shifts in commodity prices.
Vedanta closed at 2427p on Friday, 6p up on the day's trading. In the year to 31 March 2009, revenue was $6.6bn and Vedanta employed more than 29,000 people. The company's main operations are in India, Zambia and Australia, though the company believes that it has opportunities in China, Southeast Asia, and the Middle East.
A spokesman for Vedanta declined to comment, though six industry sources confirmed the plans.
In other mining news, Anglo American is understood to have approached potential bidders about selling its zinc assets, worth up to $800m.Reuse content