ANIL Agarwal’s plans for his stake in Anglo American may have taken a critical step forward after his family-owned Volcan Investments today unveiled an offer for London-listed Vedanta Limited, valuing the company at £2.33bn.
Described as a simplification of the Vedanta corporate structure, Volcan Investments will buy shares owned by minority shareholders for 825 pence per share representing a 27.6% premium over Vedanta’s share price on June 29. Agarwal is chairman of Vedanta, the company he founded.
Volcan Investments currently owns 66.53% stake in Vedanta Limited. Vedanta Limited would be delisted from the London Stock Exchange.
Agarwal described the proposal as “… a natural progression of our journey to simplify the Vedanta Group’s corporate structure”. He said Vedanta Limited’s London listing had served the group “extremely well”, but it was no longer necessary given the growth in the company and the “… maturity of the Indian capital markets”.
“In taking this important step towards greater group simplification, we wanted to ensure that the independent shareholders of Vedanta Resources Plc were provided with the opportunity to exit on attractive terms, and I believe this possible offer will deliver on that objective,” said Agarwal in a statement.
Agarwal has invested £3.5bn in Anglo American through Volcan Investments which he said was a vote of confidence in the UK-headquartered company’s African strategy. As a result, he has voting rights over nearly 20% of Anglo American.
Assuming the offer by Volcan for Vedanta is a success, the way would then be clear for Vedanta to make an offer for Anglo American which Agarwal would doubtless support given his voting rights in the target company.
In terms of the offer, shareholders in Vedanta will also be entitled to receive the previously announced dividend of 41 US cents per share dividend in respect of the twelve months ended March 31. Added to the offer price, which has been agreed ‘in principle’ with Vedanta Limited, the offer consists of a total value of 856 pence per share.
Negotiations between Volcan and an independent committee consisting of the members of Vedanta’s board of directors have begun, Volcan Investments said.
Deepak Parekh, a senior independent director of Vedanta, said his board would recommend Volcan Investments’ offer for the company. “We are now pleased to confirm our intention to recommend the possible offer to Vedanta’s independent shareholders if and when it is formally made in the terms announced today,” he said.
The development will most likely not be news to Srinivasan Venkatakrishnan, the current CEO of AngloGold Ashanti, who is due to take over as CEO of Vedanta on September 1. It will certainly be news to Mark Cutifani, CEO of Anglo American, however. The two were fellow directors when Cutifani was CEO of AngloGold Ashanti.
Investec Securities said in a note it didn’t believe there was “… an obvious read through to Anglo American”, adding that Vedanta’s share price had “gone the wrong way relative to Anglo” for Vedanta to make an approach. “Vedanta appears cheap on all the usual metrics – as Anglo did when Agarwal made his investment in Anglo – and he may simply be making a low priced investment opportunity that doesn’t necessarily have any bearing on Anglo right now,” it added.
