Anil Agarwal, the founder and chairman of aluminium-to-zinc producer Vedanta Resources (VED), is to invest up to £1.5bn in raising his stake in FTSE 100 miner Anglo American (AAL).
The news sends Anglo American up 2.3% to £13.24 in early trading on 21 September. Vedanta dips 0.5% to 829.75p.
The investment will be done via the Agarwal family trust, Volcan Investments, which has already built a 12.43% stake in the miner since March at a cost of £2bn.
Volcan says it has no plans to make a full takeover offer for Anglo, which mines various commodities including iron, copper, diamonds and coal. Vedanta also clarifies that is not involved in the Anglo investment.
The intention to take a large slice of Anglo was announced by Volcan last night. It said it would finance the deal by issuing exchangeable bonds secured by Anglo American shares.
Volcan will increase its stake in Anglo by acquiring shares from investors participating in the bond issue and on the market.
‘We are encouraged by the performance of Anglo American since our original investment earlier this year. The company has made good progress in its operational and financial performance and remains an attractive investment for our family trust,’ says Agarwal.
Investors have made a near-50% total return from owning Anglo shares over the past 12 months, according to data from SharePad. That figure includes both share price appreciation and dividend income. In contrast, Vedanta has a 69.2% total return over the same period.
Investment bank Jefferies said in July that it was concerned about Anglo’s commodity price risk specifically for iron ore and platinum group metals. It also expressed concerns about an increase in capital expenditure, operational risk (especially in coal and copper) and geopolitical risk.
Jefferies reckons Anglo’s dividend could be cut in 2018 after the miner made changes to its dividend policy.
