LONDON (Reuters) - Investors shed Vedanta Resources Plc shares on Wednesday after the India-focused miner dropped plans to split itself into three units, bowing to pressure from shareholders of its Sterlite Industries unit.
The restructuring aimed to streamline the company into three units focused on the commodities it produces: copper, zinc and lead; aluminium and energy; and iron ore.
It was welcomed by analysts when announced on Sept. 9 after a string of acquisitions in recent years resulted in overlapping businesses and cross-holdings between firms within the London-listed group.
Vedanta shares, which have shed a quarter of their value so far this year, fell 3.4 percent to 1,475 pence by 0751 GMT, lagging a 0.5 percent increase in the UK mining index.
"In view of the recent changes in global financial markets and investor feedback, Vedanta has decided not to pursue the proposed group restructuring," a statement said.
"Vedanta remains committed to simplifying and streamlining its corporate structure in the interests of all shareholders."
Wednesday's brief statement did not give details of why some investors opposed the move and how the turmoil on financial markets affected the plans.
Analyst Michael Rawlinson at Liberum Capital in London said Sterlite shareholders were worried about heavy dilution from the proposal, which would have seen new Sterlite shares issued for the transfer to Sterlite of Zambian copper unit Konkola Copper Mines (KCM).
"The news is a disappointment for Vedanta shareholders as on balance we liked the deal terms and structure," he said.
Shares in Indian-listed Sterlite, in which Vedanta owns 80 percent, jumped as much as 15 percent and were trading 9.2 percent stronger at 491.50 rupees.
ZAMBIAN UNIT VALUATION
A source close to the company said the main sticking point was the proposed valuation of KCM.
"There was widespread support for simplification, but there were a minority of Sterlite shareholders who weren't happy. So rather than force something through, the board thought it was quite important to have the support of all the shareholders," said the source, who declined to be named.
Vedanta, which earlier this month announced plans to boost aluminium output more than sixfold, will not postpone any of its capital expenditure plans, Chairman Anil Agarwal told Indian television.
"We have $6.5 billion of cash sitting with us and also the company is generating enough profit, at this time we are comfortable with pursuing our projects," Agarwal told CNBC TV18.
The firm previously said it planned to spend $9.8 billion to increase aluminium capacity to 2.6 million tonnes by 2012, making it the world's fourth-biggest producer after Rio Tinto's Alcan, Russia's UC Rusal and U.S.-based Alcoa.
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