Vedanta kicks off breakup with $20bn aluminium float

Mark Leftly
Sunday 14 March 2010 01:00 GMT

Vedanta Resources, the India-based Ftse 100 miner, is ready to begin a massive break-up of its business with the demerger of its $20bn (£13bn) aluminium division.

The new firm will be the world's fourth biggest aluminium player, behind Russia's United Company Rusal, America's Alcoa and China's Chalco.

Sources close to Vedanta, in which the Agarwal family holds the majority stake, confirmed that an announcement is expected soon, perhaps as early as this week. Over the next few years, Vedanta intends to spin-off five or six businesses, which include zinc, iron ore and power, though it will retain controlling interests in all of them.

Vedanta and its advisers, which include Morgan Stanley, Credit Suisse and JP Morgan Cazenove, believe that simplifying the ownership structures of the subsidiaries will make the overall group more valuable.

A source said that Vedanta's aluminium interests have a "potential value" of $20bn; the overall group is currently only worth about $11.3bn, but the complicated conglomerate model leads to some investors shuning the stock.

Vedanta will apply to Indian courts to demerge aluminium, a process that could take two to three months. Once a confusing share ownership structure is cleaned up, the business would then start trading in Mumbai, with a secondary listing to take place in either London or New York.

Only about 10 to 15 per cent of the company would be listed, raising up to $3bn. The initial public offering should take place by the end of the year, with even June considered a possibility if the legal process is completed quickly.

After aluminium, Vedanta's Zambian copper business is expected to be spun-off. Vedanta also has copper operations in Australia and India.

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