Acquisition offer lapses. Hindustan Zinc’s bid to acquire Vedanta’s overseas mines falls through

Acquisition offer lapses. Hindustan Zinc’s bid to acquire Vedanta’s overseas mines falls through

HZL would have to come up with a fresh proposal if it wants to revive its acquisition plans.

Hindustan Zinc’s bid to acquire Vedanta’s overseas zinc mines has fallen through. The country’s largest zinc miner would need to return to the drawing board, and come up with a fresh proposal if it plans to revive its acquisition plans, senior government officials aware of the developments, said. Hindustan Zinc is a Vedanta subsidiary.

Since Indian laws mandate that related party transactions are cleared by majority of minority shareholders, and the Centre had already raised objections to the deal, it meant Hindustan Zinc didn’t have the requisite majority.

The Centre owns a 29.54 per cent stake in the company, while Vedanta has a 64.9 per cent holding.

According to those in the know, three months had lapsed since the Hindustan Zinc board passed a resolution to acquire Vedanta’s overseas zinc assets for $3 billion. The fiscal year (FY23) had also ended. Therefore, under the Companies Act, a fresh proposal has to be drafted and presented to the board and shareholders for approval.

“The company needs to start from scratch, which means restart valuation of Vedanta’s zinc mines, and then proceed with all other processes. In short, the offer for acquisition has lapsed,” those in the know told businessline.

In a stock exchange submission made in January 2023, Hindustan Zinc offered Vedanta nearly $3 billion in cash to acquire THL Zinc Ltd, Mauritius. However, the Mines Ministry – a minority shareholder – raised objections to the deal.

Ministry members, who are also on Hindustan Zinc’s board, had reportedly raised objections at the board meeting too.

Objections came on the grounds that it was an all-cash buy and valuations were too high. Moreover, it was a related party transaction and would drain the company’s cash reserves.

In fact, the management was asked to explore “other alternative ways”, including a share swap, or similar non-cash mechanisms (to fund the buy).

The Hindustan Zinc board comprises Priya Agarwal Hebbar – Anil Agarwal’s daughter – who is currently the Chairman; Arun Misra, the CEO; and Navin Agrawal, apart from the joint secretary levels officers in the Ministry of Mines – Veena Kumari Dermal and Farida M Naik. It also includes Joint Secretary and Financial Advisor, Ministry of Coal and Ministry of Mines, Nirupama Kotru. Other board members include Akhilesh Joshi – former CEO of Hindustan Zinc (2012-2015); Anjani K Agrawal and Kannan Ramamirtham.

In March, Hindustan Zinc declared a final dividend of Rs 11,000 crore ($1.34 billion), tying up cash reserves it was planning to fund the acquisition.

Overseas aquisition

Meanwhile, Hindustan Zinc continues to explore acquisition of overseas assets. Sources say with zinc prices plummeting, “overseas assets” could come up at “lucrative costs,” especially at lower prices.

“Overseas acquisition plans continue to be explored,” a source said.

Zinc prices are said to be in the $2,300 per tonne range – a fall of nearly $800 per tonne over a three-month period – with low LME stocks, lower than expected demand recovery in China, and dwindling demand for galvanisation.

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