FTSE 100 giant Anglo American has called in a trio of investment banks to fortify its defences as it digs in against a takeover bid. The £30bn company's advisers, Morgan Stanley, Goldman Sachs, and Centerview, have been drawing up plans to fend off Volcan Investments, mining tycoon Anil Agarwal's holding company which also controls his metals empire Vedanta Resources. A City source said, “Anglo is at the ready. Their defence advisers are armed with files.” Planned rearguard actions are understood to include attacks on the quality of Vedanta's portfolio of mines compared with Anglo's assets.
Agarwal began building a stake in Anglo in March 2017, through a three-year JP Morgan mandatory-convertible bond, buying a second tranche in September of that year to bring his total stake to more than 19pc. The move made him the biggest shareholder in Anglo, ahead of South Africa's state-run Public Investment Corporation (PIC). However, his stake is effectively held via debt and if he does not buy the underlying shares of roll over the loan within three years he will no longer own the shareholding. This looming deadline of 2020 has put Anglo's board, led by Chairman Stuart Chambers, on high alert.
Agarwal had previously said he was not planning a takeover and that the stake was purely an investment but the tycoon has long sought to expand his natural resources empire. Bankers believe that he is working with advisers at JP Morgan on how to finance a bid, possibly as soon as September. A City source said, “He doesn't have the money right now. He will look to find a partner such as a sovereign wealth fund or agree as part of any deal to sell some assets. If he wants to bid, he needs to do it by the end of the year.”
Just earlier this year, Agarwal ticked off Vedanta shareholders when one of his subsidiaries bought a slice of Volcan's holding in Anglo for £154m, triggering a 20pc drop in Vedanta's share price on the Indian stock market. The company said the investment would drive a better return than holding cash in the bank, but the move sparked speculation that Agarwal had designs on Anglo. Shares in Anglo have risen around 80 pc since Agarwal's investment, although because of the unusual nature of his holding he has to split any profit with the underlying owners of the stock.
The company said the investment would drive a better return than holding cash in the bank, but the move sparked speculation that Agarwal had designs on Anglo. Shares in Anglo have risen around 80 pc since Agarwal's investment although because of the unusual nature of his holding he has to split any profit with the underlying owners of the stock. While Agarwal's true intentions have remained obscure, he has made no secret of his desire to increase ties between South Africa, where Anglo has a string of operations, and India, where Vedanta primarily operates.
Agarwal has said very little about the investment other than that he likes Anglo's progress this year and thinks it is an “attractive investment” for his family trust. In 2016, his suggestion that Vedanta could merge with Anglo was rebuffed by the latter an early stage. One popular theory holds that Agarwal is positioning himself for a potential break-up of Anglo, which marked its 100th anniversary on the day he announced his £1.5bn investment.
