Vedanta to use IPO money to fund Cairn deal

London-listed miner Vedanta Resources Plc plans to use proceeds from the initial public offer (IPO) of its Zambian copper business to part fund its $9.6 billion acquisition of Cairn India .

The Anil-Agarwal led firm plans to use some of the $1.1 billion it plans to raise through the offer of Konkola Copper Mines (KCM) to repay part of the $6-billion debt it has taken to acquire majority stake in Cairn India, according to a circular the company sent to its shareholders.

Vedanta had on November 19 stated it has tied-up $6 billion in syndicate and bridge loans to fund the cost of buying about 51 per cent stake in Cairn India from parent Cairn Energy and another 20 per cent from the open market.

A couple of days prior to that, billionaire Anil Agarwal-run firm had announced plans to list KCM, the second-biggest integrated copper producer in Africa, selling new and existing shares to raise about $1.1 billion.

While Vedanta did not say what it planned to do with the proceeds of the initial public offering of Konkola, the firm in the circular to its shareholders seeking nod for Cairn deal stated that a $1 billion bridge or short-term loan will be paid off from the IPO proceeds.

"It is intended that (the $1 billion bridge loan arranged by Goldman Sachs, JP Morgan and Morgan Stanley Bank) will be repaid from the proceeds of the IPO of shares of Konkola," Vedanta said in the circular.

Shareholders of Vedanta gave their consent to the Cairn acquisition at a meeting in London on December 13. Vedanta has put April 15 as the deadline for closing the Cairn India acquisition after obtaining all necessary regulatory consents and government approvals.

Besides the $1 billion bridge loan, Vedanta has also got another bridge loan of $1.5 billion from Barclays Capital, Citigroup, Credit Suisse, The Royal Bank of Scotland and Standard Chartered Bank, the circular said.

It has got a syndicated term loan of $3.5 billion from Barclays Capital, Citigroup, Credit Suisse, Goldman Sachs, JP Morgan plc, Morgan Stanley Bank, The Royal Bank of Scotland and Standard Chartered Bank.

Vedanta has delayed the London-listing of Konkola Resources, the holding company of KCM, to 2011 due to stock market volatility.

"With year end approaching and the current stock market volatility, the boards of Vedanta Resources plc and Konkola have decided to pursue such listing in 2011," it had said in a statement on November 30.

Vedanta holds an indirect 79.4 per cent stake in KCM, with the remainder held by ZCCM Investments Holdings, majority-owned by the Zambian government. Vedanta will retain a majority of KCM, which will also be listed in the Zambian capital of Lusaka.