Albanese Seeks to Polish Rough Edges Off Agarwal’s Vedanta
Tom Albanese is looking to add some polish to the rough edges of Indian billionaire Anil Agarwal’s Vedanta Resources Plc. (VED)
“Between the two of us I think we have an opportunity to create a very strong diversified producer,” Albanese, 56, said after being hired as chief executive officer. “Agarwal has been always good at finding gems in the rough and I’m just here to polish those gems up and bring value for them.”
That may be a relief for investors used to Agarwal’s style of business. Vedanta has lost 60 percent of its value since he led an $8.7 billion takeover of oil company Cairn India Ltd. (CAIR), until then an industry unknown to the copper and zinc producer. The billionaire’s more than two-thirds stake in Vedanta meant he didn’t need to win over shareholders concerned about the deal.
The appointment is a “net positive,” said Citigroup Inc. analysts in a note. “A key concern, however, will be whether Mr. Albanese would have enough powers given the controlling stake held by Agarwal family. The market is likely to wait and see if the new CEO is provided with enough cards to play.”
Vedanta fell 3.4 percent to 862.5 pence at the close in London, after yesterday’s 4.1 percent jump on the appointment. That’s a fraction of the 20 percent the stock slumped in the week the company announced the Cairn India deal in August 2010.
“A powerful owner with clear control, plus a notionally independent chief executive is not a combination that has worked well so far in mining,” Sanford C. Bernstein Ltd. analyst Paul Gait said. “So there’s definitely that question mark. It’s a difficult combination, one with a checkered history in mining.”
The new CEO’s top priority may be the industry that caused him the most trouble at Rio Tinto. Albanese, a mining engineer by training, departed from the London-based company after writing down $14 billion on assets including Alcan Inc., the aluminum producer it bought for $38 billion in 2007.
Vedanta’s $8 billion investment in an aluminum complex in Odisha, India, is stalled on a bauxite shortage as mining of the raw material was blocked by environment and tribal campaigners.
“We have quite a bit of our balance sheet tied up in assets in the aluminum sector that aren’t producing any products,” Albanese said. “It will be the first and foremost to grow that business and to utilize those assets.”
The third-generation Italian-American, who succeeds current CEO M.S. Mehta on April 1, will seek to ramp up aluminum smelter capabilities after finding a bauxite source within Odisha or other regions of India in the next couple of years, he said.
He also seeks to reduce deaths at Vedanta operations after it reported 20 fatalities during the last fiscal year.
“Albanese is a very experienced mining executive with a long track record in the industry,” Sanford’s Gait said. “This kind of experience is an incredible value especially for a company trying to establish itself a global significance.”
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