Sesa scoops up Dempo’s assets

India’s largest private iron ore exporter, Sesa Goa, has completed the second-largest acquisition in the history of the country’s iron ore industry, ending a long drought in large M&A deals.

Sesa Goa, a subsidiary of London-listed Vedanta Resources, acquired Goa-based Dempo Group’s mining and maritime businesses for Rs17.5 billion (US$368 million) in an all-cash deal.

In April 2007 Vedanta bought a 51% stake in Sesa Goa from Mitsui for Rs40.7 billion (US$840 million), at that time the largest M&A deal in India’s iron ore sector.

Led by partner Madhurima Mukherjee, Luthra & Luthra advised Sesa Goa and a division of Vedanta Resources in the direct and indirect acquisition of Dempo Group’s mining assets. The deal involved the acquisition of 100% of the equity in VS Dempo & Co, which in turn holds 100% of the equity shares of Dempo Mining Corporation and a 50% stake in Goa Maritime.

The assets sold include mining leases, mining rights, and related infrastructure in Goa. The acquisition gives Sesa Goa access to Dempo’s 70 million tonnes of iron ore deposits in Goa. The transaction was funded by Sesa Goa from its cash reserves.

J Sagar Associates advised the target company, Dempo, while Ambit Corporate Finance acted as financial advisors on the transaction.

India is the world’s largest supplier of iron ore after Australia and Brazil, producing more than 200 million tonnes annually and exporting around 50% of that amount. China is India’s biggest buyer, enjoying the benefit of low freight costs due to geographical proximity. Sesa Goa is the largest exporter to China. It sold roughly eight million tonnes to the country in 2008-2009. Ore from Goa, on India’s west coast, is competitively priced because the mines are close to port areas and road and rail charges are not incurred.

“We are highly delighted with this opportunity to consolidate our iron ore business,” Anil Agarwal, chairman of the Vedanta group remarked. “The integration of Sesa and VS Dempo’s operations will achieve great synergy.”