Mining billionaire Anil Agarwal plans to buy stake in South Africa’s Anglo American Plc for up to 2 billion pounds (USD 2.4 billion) to gain a foothold in diamond mining business.
Anglo is the owner of the De Beers, the world’s leading diamond exploration, mining and marketing company, producing over 30 million carats of diamonds per annum, 35 per cent of global rough diamonds production.
“Volcan Investments Ltd announces that it intends to make an investment in Anglo American plc shares of up to 2 billion pounds,” the company announced late last night.
Volcan is a holding company, wholly owned by the Agarwal family trust, and this is a personal investment by Vedanta Resources Group Chairman Anil Agarwal.
According to industry estimates, the investment will give Agarwal about 12-13 per cent stake in Anglo, making him the second-largest shareholder after South Africa’s Public Investment Corp.
The stake purchase announcement comes nearly a year after Agarwal’s plans to merge his mining business with Anglo was rejected.
Agarwal said the purchase being made now was a family investment and he won’t make a takeover bid.
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Commenting on the investment Agarwal said: “This is an attractive investment for our family trust. Anglo American plc 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 plc.”
The diamonds sold by De Beers to its clients trickles down to the secondary market in Surat and Mumbai, where they are sold to small and medium diamantaires and even big companies. India is the largest consumer of rough diamonds in the world.
Vedanta Resources in a separate filing said the company confirms that the proposed investment is being made by Volcan alone, and that the company is not participating in Volcan’s investment.
“Vedanta is committed to its strategic priorities, including ramping up production from its portfolio of low cost assets, increasing its free cash flow, and continuing to optimise and deleverage its balance sheet,” it said.
Agarwal had approached Anglo American for potential merger with Hindustan Zinc in 2016 but Anglo had rejected this proposal.
Agarwal has majority stake in Hindustan Zinc through Vedanta Ltd.
“Volcan intends to finance the investment in Anglo American plc shares through the issuance by Volcan Holdings plc, a wholly owned subsidiary of Volcan, of a mandatory exchangeable bond, led by J P Morgan as Sole Bookrunner, on or around 11 April 2017 that will be secured by Anglo American plc shares,” Volcan Investments had said yesterday.
It said Volcan and the Volcan Holdings intend to purchase the Anglo American plc shares in the market via a combination of purchases from investors in the mandatory exchangeable bond and on market purchases, subject to certain conditions, until or close to the closing date.
Sources said buying into Anglo American, whose portfolio includes diamonds and platinum is set to diversify Agarwal’s holdings.
Volcan’s announcement also said that neither Volcan nor Vedanta intended to make an offer to acquire Anglo American.