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Vedanta’s Anil Agarwal stuns London markets with Rs 16K cr share buy in De Beers parent firm

Anglo American is one of the top five mining companies in the world and owner of the world’s biggest diamond producer De Beers
India TV Business Desk New Delhi March 17, 2017 11:42 IST
India TV Business Desk

Vedanta chairman Anil Agarwal sent the financial hub of London in a tizzy with a shocking $2.4 billion (Rs 15,800 crore approx.) share purchase in Anglo American, one of the top five mining companies in the world and owner of the world’s biggest diamond producer De Beers.  

The audacious share purchase, which some British newspapers even described as a ‘raid’ and ’share grab’, will put Agarwal's family trust Volcan Investments as the second largest shareholder in Anglo American with around 13 per cent stake, just behind South Africa's Public Investment Corporation, which has a 15 per cent holding.

The move comes after Anglo American had summarily refused Agarwal’s proposal for a merger with Vedanta Resources last year. Though both Volcan and Vedanta have said that the share purchase was a personal investment decision by Agarwal and that they did not have acquisition on their mind, the latest development has sent analysts wondering otherwise.

The past few weeks have seen immense speculation on Vedanta pursuing acquisitions on the back of recovering commodity prices and a bounce back in share price. Besides, Agarwal, whose family controls 61 per cent stake in Vedanata Resources, has strengthened the top management with recent inductions like former Rio Tinto boss Tom Albanese as CEO and ex- Royal Bank of Scotland executive Viral Gathani as corporate finance and strategy head for the group.

A Times of India report quoted top bankers who have worked with Agarwal and Vedanta as saying that the investment “is not friendly but not necessarily hostile”.

Analysts tracking the metals and mining sector said Agarwal could push for a break-up of the storied, 100-year-old Anglo American, and look at acquiring assets that are synergistic to the Indian mining powerhouse Vedanta.

Anglo American is the largest miner of platinum with almost 40 per cent share of the global output, besides being a significant producer of diamonds, copper, nickel and iron ore. It has an annualised revenue of $23 billion (Rs 1.5 lakh crore) and operating profit of about $6 billion (Rs 40,000 crore).

Anglo American, which has its headquarters and Johannesburg and London, took control of De Beers through share purchases from the Oppenheimer family which has been embroiled in controversies regarding ‘blood and conflict’ diamonds.

While media reports in the British press do not predict any immediate hostile move by Agarwal, they do expect him to have an eye on Anglo American's superior technological mining know-how to optimise operations at its production hubs.

Shares of both Anglo American and Vedanta gained significantly during Wednesday morning trade on London bourses, up 9 per cent and 10 per cent respectively. With a maket value of $22 billion (Rs.1.44 lakh crore ), Anglo American is significantly bigger than Vedanta Resources which has a market value of $3.1 billion (Rs 21,000 crore).