NEW DELHI, Feb 25: London-listed mining heavyweight Vedanta Resources said on Saturday it was combining its two Indian subsidiaries into a metals giant that will have a market capitalisation of $20 billion.

Under the restructuring aimed at streamlining Vedanta's operations, metals producer Sterlite Industries will merge with iron ore miner Sesa Goa, creating one of India's biggest companies with annual revenues of $14.2 billion.

The new company, to be known as Sesa Sterlite, will create an “Indian natural resources champion”, said Vedanta's billionaire chairman Anil Agarwal, known as “the metals king.”

“This transaction is a natural evolution, leading to simplification of the group's structure,” he said. “We will have one company, Vedanta, which will be the holding company and have one operating company which will be Sesa Sterlite.” “This is the new baseline from which we are looking forward,” said the Indian-born mining magnate who is based in Britain.

The transaction will be carried out through an all-share deal in which three Sesa Goal shares will be issued for every five Sterlite shares, the company said in a statement.

The merger is expected to create “significant synergies” that will generate cost savings of $200 million a year, the company added.

The new company will have a market capitalisation of $20 billion, MS Mehta, group chief executive of Vedanta Resources, told a televised news conference.

“Operations are physically close to the growing markets which is an advantage,” Mehta added.

Mehta said that the restructuring was expected to be completed by the end of 2012, subject to regulatory approvals.

Other Vedanta group companies, Vedanta Aluminum and the Madras Aluminum Company, will be consolidated into Sesa Sterlite along with Vedanta's stake in energy explorer Cairn India.

The move will reduce the debt of Vedanta Resources which paid $8.7 billion last year to acquire control of Cairn India. Vedanta will transfer its holding in Cairn, including a debt of $6 billion, to the new company, thereby reducing its own debt.

Vedanta has been seeking to improve its debt profile after its bond rating was downgraded. The group's total debt stands at nearly $10 billion.

The announcement was made following a meeting of the boards of Sterlite Industries and Sesa Goa. —AFP