Hindustan Zinc Ltd's proposal to buy zinc assets from billionaire Anil Agarwal-controlled Vedanta Group for $2.98 billion in cash has closed as the mining company did not get shareholders' approval within the stipulated time limit, a Reuters report said quoting two government sources.
Earlier, it was reported that Hindustan Zinc Ltd (HZL), a subsidiary of Vedanta Limited, may not pursue the preplan of buying parent Vedanta Resources’ global zinc business for $2.98 billion in cash as the government was not keen on the sale. In HZL, which was divested over two decades ago, Vedanta has around 64.92 per cent stake, whereas the government holds a 29.54 per cent stake.
The Centre had opposed the proposed cash deal before and warned of legal action. The cash deal was crucial as Vedanta Resources is looking into options to reduce its debt burden. The mines ministry had urged Vedanta to explore other cashless methods of acquisition of these assets. Valuation of the assets is among several concerns flagged by the government.
The deal was announced in January's second week, after which Hindustan Zinc had three months to call an extraordinary general meeting to seek approval from its minority shareholders.
"The issue is dead because three months have lapsed," a government official told Reuters.
In March, Hindustan Zinc declared a final dividend of $1.34 billion, tying up its cash reserves through which it was planning to fund the acquisition, the source noted. HZL had consolidated gross investments and cash and cash equivalents of Rs 164.82 billion as of December 31.
Hindustan Zinc's shares prices have gone south since the deal was announced. This jeopardised the government's plan to sell part of its stake. It has since put that plan on hold.
Govt’s resistance to Vedanta proposal
The Centre was looking to sell a stake in Hindustan Zinc (HZL) via the Offer For Sale (OFS) mode. Agarwal was hopeful for this divestment to sail through, as the non-receipt of the government’s approval is a hurdle in pursuing the proposed sale of Vedanta’s Zinc International Assets with Hindustan Zinc.
In January, Vedanta said the proposed sale of its Zinc International assets could be in a phased manner for a cash consideration of up to $2,981 million.
If Vedanta acquired the additional 6 per cent stake in Hindustan Zinc, the government’s share would have come down to 24 per cent from 29.54 per cent. That would mean the Centre would lose the special rights over the company. The Centre was not in favour of selling its entire stake directly to Vedanta keeping the interests of minority shareholders in mind.
(With agency inputs)