Billionaire Agarwal to Buy $2.4 Billion Anglo American Stake

  • Indian owner of Vedanta Resources may buy up to 13% stake
  • Agarwal approached Anglo American for potential merger in 2016

Anil Agarwal

Photographer: Halden Krog/Bloomberg

Anil Agarwal, an Indian mining billionaire, plans to buy as much as 2 billion pounds ($2.4 billion) of Anglo American Plc shares in the market after a merger proposal failed last year.

The full stake would equate to about 13 percent of Anglo’s stock, making Agarwal the second-largest shareholder after South Africa’s Public Investment Corp. It will give him a strong voice in the company’s strategy as the blue-chip British mining firm cements its recovery from a slump in commodity prices.

While Agarwal said the purchase was a family investment and he won’t make a takeover bid, the brash Indian tycoon offered to merge part his mining empire with Anglo American last year, only to be rebuffed. The London-based mining group, which is currently looking for a new chairman, is seen as a candidate for a potential break-up through splitting its South African assets from the global mining business.

“It gives him an extremely good seat at the table if there is going to be any corporate activity,” said Jeremy Wrathall, head of mining research at Investec Plc. “We expect that M&A is going to be the next phase and maybe this is firing the starting gun.”

The purchase will be funded via a mandatory exchangeable bond issued by his holding company, Volcan Investments Ltd., and secured by Anglo’s shares, the investor said in a statement on Wednesday. A representative for Anglo American declined to comment.

The shares rose 10 percent to 1,316.50 pence as of 8:06 a.m in London. Anglo was the best performing stock on London’s FTSE 100 Index last year, gaining 287 percent amid recovering commodities prices and a cost-cutting program.

“There is no operational overlap between the companies, no synergies and no strategic benefit that we can see other than scaling up and globalising Vedanta,” Barclays Plc analysts Amos Fletcher and Ian Roussow wrote in a note. “We would see this therefore as a speculative personal investment by Agarwal that is likely to be supportive for the Anglo share price in the short term, but see little chance of a potential broader combination emerging.”

Bulls in Vedanta bonds are betting that Agarwal’s plan will extend a rally that’s already doubled their money in the last year. Vedanta’s 7.125 percent note due 2023 jumped 1.1 cent on the dollar to 102.4 cents, the sharpest increase in almost two months, according to data compiled by Bloomberg. The bonds were in distress at 49.7 cents at this time last year, before a rebound in commodities helped lift them.

Anglo American, a company founded by the storied Oppenheimer dynasty in South Africa a century ago, is one of the world’s top five mining groups, alongside BHP Billiton Plc, Rio Tinto Plc, Vale SA and Glencore Plc. Its key assets include giant copper mines in Chile, iron ore operations in Brazil and South Africa and De Beers, the iconic diamond producer.


“This is an attractive investment for our family trust,” Agarwal, who founded Vedanta Resources Plc, said in the statement. “Anglo American is a great company with excellent assets and a strong board and management team who are executing a focused strategy to drive shareholder value. I am delighted to become a shareholder in Anglo American.”

At the World Economic Forum in Davos in January, Agarwal defended last year’s attempt to merge his group, which includes one of the largest zinc miners, with Anglo American.

"It was a good match. One and one wasn’t going to be two, but 11," he said in an interview.

Anglo American’s shares slumped to a record low in London in early 2016 as weak metal prices focused attention on its debt position. Chief Executive Officer Mark Cutifani announced a plan to radically shrink the company through asset sales, but reversed the strategy early this year after recovering commodity markets revived profits.

JPMorgan Role

JPMorgan Chase & Co. is acting as the sole bookrunner and underwriter on the financing as well as the coupon guarantor. Volcan plans to place the bond on or around April 11, the statement said.

The deal is a coup for JPMorgan, which rose three places to rank second in equity offerings in Europe, the Middle East and Africa last year, according to data compiled by Bloomberg.

The holding is similar to Liberty Global Plc’s 9.9 percent stake in ITV Plc and the Qatar Investment Authority’s holding in J Sainsbury Plc.

Vedanta said in a separate statement that the investment is being made by Volcan alone, and it’s not participating in the purchase. 

The Agarwal family, who control 69.4 percent of Vedanta, pledged 21.65 percent of the company’s shares to JPMorgan to the financial deal. They also pledged Vedanta bonds worth $123 million.

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