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.