Vedanta's Anil Agarwal to invest $2.4 bn in Anglo American
16 March 2017
London-based Indian billionaire Anil Agarwal plans to invest $2.4 billion (£2 billion) in diversified mining giant Anglo American Plc, a year after his merger plans collapsed.
The bold and strategic move also comes four years after Anil Agarwal's Vedanta Resources had acquired Anglo American Zinc for $1.3 billion (See: Vedanta buys Anglo American Zinc for $1.3 billion).
Although Agarwal said that that he has no intention to make a takeover offer for the London-listed company, which has a market cap of around £16.9 billion, analysts are skeptical about his true intentions.
"This is an attractive investment for our family trust", said Agarwal in a 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", he added. "I am delighted to become a shareholder in Anglo American."
Agarwal will purchase around 13 per cent of Anglo American through his family trust, Volcan Investments, which would be funded by exchangeable bonds.
Volcan intends to finance the purchase through a mandatory exchangeable bond, led by J.P. Morgan as sole bookrunner, and buy the shares on 11 April 2017 from investors and the open market.
The Agarwal family, who control 69.4 per cent of Vedanta, pledged 21.65 per cent of the company's shares to JPMorgan to fund the deal and also pledged Vedanta bonds worth $123 million, according to a Bloomberg report.
The purchase will make Agarwal the second-largest shareholder in Anglo American after South Africa's Public Investment Corp.
Founded by the Oppenheimer dynasty in South Africa more than a century ago, Anglo American is one of the world's largest mining companies with a portfolio spanning iron ore, manganese, metallurgical and thermal coal, copper, nickel, diamonds, and platinum.
Anglo American, along with other mining companies, has taken a hit from the global slump in commodity prices that started in the beginning of 2015.
It started selling coal and other assets to tide over the slump and reduce its net debt to under $10 billion by the end of 2016.
It sold its niobium and phosphates assets to China Molybdenum for $1.5 billion, its70-per cent stake in the Foxleigh metallurgical coal mine in Queensland, Australia to a consortium led by Taurus Fund Management and other smaller coal and other assets in order to focus on copper, platinum and diamonds.
Late last year, it halted asset sales after commodity prices started to go up, which also saw its stock price soaring by nearly 300 per cent prompting the company to resume dividend payouts.