The India Perspective: Why Agarwal’s Volcan Invested in Anglo American

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Late last week, Indian media was rife with reports of Vedanta Resources PLC Chairman Anil Agarwal making a “surprise” bid for about 13% of mining giant Anglo American PLC for $2.4 billion, even as the British newspapers headlined the development as a “raid.” Anglo American owns De Beers, one of the world’s largest diamond exploration and mining companies.

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The move to acquire the shares was made through Agarwal’s personal investment firm Volcan Investments in London.

Here’s the lowdown on Anglo American: The U.K.-headquartered Group, with operations in South Africa, North and South America, Asia and Europe, has revenue of $23 billion, EBITDA (earnings before interest, tax, depreciation and amortization) amount to $6.1 billion, and it has a market value of over $20 billion. In addition to diamonds, Anglo is a global player in platinum and base metals and minerals — it mines copper, nickel, niobium and phosphates. It also sells commodities such as iron ore and manganese, metallurgical coal and thermal coal.

When the 13% shares are acquired, Agarwal’s Volcan will be the second-biggest shareholder after the South African Government investment firm Public Investment Corp., which owns 14%. Volcan, said news reports. Volcan intends to finance the investment through mandatory exchangeable bonds. Led by JPMorgan Chase & Co., the bond sale will take place on or around April 11, the closing date.

Agarwal is the founder of Vedanta but he said he doesn’t intend to make a takeover offer for Anglo American, though a merger between the two failed last year. Incidentally, in 2010, Vedanta acquired Anglo American’s portfolio of zinc assets in Namibia, South Africa and Ireland.

Agarwal told the Sunday Times that he “liked” Anglo’s entire balanced portfolio, both in South Africa and elsewhere.

Some years ago, through his entities, Agarwal had also signed an agreement with the South African government for sharing mining technology.

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He said he would be “fully supportive of the board, management and strategy”.

Metal trader turned mining tycoon Agarwal started as a scrap dealer way back in 1975, and his has been a rags to riches story so far but we’ll have to wait and see if his interest in Anglo American is more than just that of a minority investor.

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