The mergers and acquisitions have long term effects and results are not seen in immediate vicinity and as a net result generally mergers and acquisition gets thumbs down from the market.
Merger of Sterlite into Sesa Goa has been announced and will take place by issuance of three shares of Sesa for every five shares of Sterlite, thereby forming a new entity called ‘Sesa Sterlite. Vedanta’s group companies, Vedanta Aluminum (VAL) and Madras Aluminum Company (MALCO), will be 100 per cent consolidated into Sesa Sterlite. As a net result Sesa Sterlite has become seventh-largest global diversified natural resources major by terms of EBIDTA.
The highlight of the day is the transfer of Vedanta’s 39 per cent stake in Cairn India to Sesa Sterlite along with the latter’s associated debt of USD 5.9 billion.
London shareholders get a better deal and the prices of Vedanta goes up.
Sesa Goa shareholders get a poor deal and thus share prices have gone down.
Moral of the Story
There are no permanent friends in politics and business and it is permanent interests. The gain of one may be a loss for other and thus there is no point crying over the spilt milk.