Anglo shareholder in pound seats

INDIAN mining tycoon Anil Agarwal surprised the market yet again last week, announcing an interest in increasing his stake in Anglo American to 20% and rocking the future of the business turning 100 this week.

This would make the Indian billionaire the biggest Anglo shareholder, kicking the Public Investment Corporation (PIC) into second place.

The announcement came as the miner celebrated its centenary at Vergelegen in Cape Town, where it hosted about 1 000 stakeholders, including old executives.

Agarwal’s move last week strengthens the belief that he is not going to play the role of passive investor through his family trust, Volcan Investment.

Agarwal declined to comment after the announcement but in a statement by Volcan Investments he said he did not have any intention to acquire Anglo American as he was still bound by UK takeover laws.

The laws require a takeover to be triggered at a 30% stake or more and for the bidder to disclose his interests if he was to do so.

It is known that only about a year ago Agarwal proposed a merger between Anglo and his company, Vedanta Resources, but the deal was rejected by Anglo’s board.

Since Agarwal’s first purchase of Anglo shares in March, the miner’s shares have gained almost 23%, compared to a lower than 8% rise in the JSE all-share index.

Agarwal, who is prepared to pay £1.5-billion (about R27-billion) to increase his stake to 20%, is renting Anglo’s shares until the exchangeable bond matures in 2020.

This means he has to issue a bond, which still needs to be accepted by shareholders, to make an absolute 20% stake.

The takeover rules stop Agarwal from approaching Anglo for six months.

That restriction doesn’t apply to Anglo if it wants to approach Agarwal.

“He doesn’t know how much he has got and I think saying 20% is not really true, it could be more or less, but it doesn’t really matter because only at 30% does it trigger an offer to minorities and then we will really see what he is after,” Noah Capital Markets analyst Rene Carlo Hochreiter said.

Momentum analyst, Percy Takunda, said at some point management and shareholders’ expectations should align and Agarwal’s interest would be to get value for his investment, which is the expectation of any other Anglo shareholder as well.

However, he added that in the case that management expectations and proposals did not align with those of shareholders, “the shareholders, as the owners of the company, can change the management of the company and appoint one that is focused and aligned to their vision or strategy”.

He added that anyone who was interested in buying Anglo would have to make a compelling offer to all existing shareholders, and if shareholders liked the offer and were prepared to accept it, the buyer could do whatever he wanted with the company.

Although Agarwal was in the process of increasing his stake in the business, it was still unclear whether he would make an offer to shareholders in the future.

All that was clear was that it was not a personal investment and that he had something in mind.

Coronation, which owns a 4.4% stake in Anglo, and the US’s Blackrock which holds a 6.3% stake, both declined to comment on the future of their investments at Anglo. — BDLive