Vedanta seeks shareholder support for buyouts in Hindustan Zinc & Balco

Vedanta Resources PLC issued a circular Monday, that seeks to extend shareholder support for its proposed purchase of the Indian government's minority stakes in Indian zinc producer Hindustan Zinc Ltd. and aluminum company Bharat Aluminum Co. Ltd.

Vedanta called upon its shareholders to back a spending limit on the combined purchase of a 29.5% stake in Hindustan Zinc and a 49% stake in Balco to $3.482 billion or no more than $487 million for just the Balco stake. This compares to a previously expired spending limit of no more than $3.379 billion for the two combined stakes or no more than $550 million for just the Balco stake. That spending limit expired in August.

Vedanta exercised options to buy out the remaining shares it doesn't already own in Balco and Hindustan Zinc in 2004 and 2009, respectively. The Indian government, however, contested the legality of the options, which resulted in protracted legal disputes that are still ongoing.

In an effort to move beyond the disputes, Vedanta offered in January last year to buy the Indian government's 29.5% stake in Hindustan Zinc for $2.938 billion and the government's 49% stake in Balco for $338 million. As part of the deal, Vedanta agreed to drop all litigation.

The Indian government has yet to accept the offer.

Vedanta said in its circular that there is no certainty that the Government of India will accept the offer but it noted in its circular that the " Company is taking the opportunity to obtain approval from shareholders [to buy the two minority stakes] so that, if the GoI determines to sell its interests, the Company can seek to acquire all or part of the GoI's interests in a timely manner."

Vedanta has called on shareholders to vote on the minority buyout proposals on Oct 30.

Hindustan Zinc is a fully integrated zinc, lead and silver producer which produced 870,000 metric tons of mined zinc-lead and accounted for 67% of Vedanta's total mined zinc-lead production in the fiscal year ending March 31, 2013.

Balco produced 247,000 metric tons of aluminum in the financial year ended March 31, 2013 and accounted for 32 % of Vedanta's total aluminum output during the last fiscal year. Following the completion of scheduled expansion projects, Balco's aluminium business is forecast to be able to smelt 570,000 tons of aluminum annually with integrated power.