Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Anil Agarwal faces shareholder resistance to $1 billion Vedanta bid

Published 03/07/2018, 18:34
© Reuters. A bird flies past the logo of Vedanta installed on the facade of its headquarters in Mumbai
BARC
-
VED
-
HG
-

By Ben Martin

LONDON (Reuters) - Billionaire Anil Agarwal faces investor resistance to his $1 billion bid to buy out minority shareholders in Vedanta Resources (L:VED) and take the London-listed Indian miner private.

Vedanta, chaired by its 64-year-old founder Agarwal, on Monday announced that its independent board directors were prepared to back an 825 pence-a-share bid from Agarwal's family trust, Volcan, to acquire the 33.5 percent of the company that it does not already own and delist the group.

Under the proposal, Volcan would spend 778 million pounds (778.00 million pounds) buying out minority investors in a deal which would value Vedanta as a whole at about 2.35 billion pounds.

But a large minority shareholder in the mining group told Reuters the bid was too low and that his investment firm will raise concerns about the deal with Vedanta's independent directors.

"We think that this offer is very opportunistic and massively undervalues Vedanta," said the shareholder, who declined to be identified.

"It's the worst possible time for minority shareholders to be taken private," he said, adding that he believed Vedanta was worth between 11 pounds and 12 pounds-a-share.

It follows a warning from Barclays (LON:BARC) analysts on Monday that the bid by Indian industrialist Agarwal was "opportunistic" and may encounter "some resistance from minority shareholders."

Agarwal, who started out as a scrap metal trader, has expanded Vedanta into a natural resources group with operations spanning oil and gas, metals, including iron ore mining and aluminium smelting, and power generation.

It was listed in London 15 years ago and owns just over 50 percent of India-listed Vedanta Ltd, which has a market value of about $12.5 billion, and a controlling stake in Zambia's Konkola Copper Mines (KCM).

Taking the London-listed company private would help to simplify the complicated corporate structure behind Agarwal's business interests.

Volcan's bid comes after Vedanta shares, which rose above 11 pounds in February last year, fell to their lowest level in a year last week, closing at 632.4 pence on June 25 in London, according to Thomson Reuters data.

The stock has slumped following a deadly incident in India in May, when police fired on protesters seeking the shutdown of a Vedanta-owned copper smelter, killing 13.

The large minority shareholder told Reuters that Volcan's bid did not reflect Vedanta's prospects and potentially positive catalysts for the share price.

These include the arrival of a new chief executive, Srinivasan Venkatakrishnan, in August and the KCM business starting to turn cash flow positive, the investor said.

A spokesman who acts for both Vedanta and Volcan declined to comment.

Vedanta shares were above the level of Volcan's bid on Tuesday, closing up 1.3 percent at 828.4 pence.

As well as 825 pence-a-share in cash from Volcan, minority investors will also be entitled to receive the dollar-denominated dividend the miner is due to pay next month, which will take the total consideration to 856 pence-a-share at exchange rates on Friday, which was the last trading day before Volcan's bid was announced.

© Reuters. A bird flies past the logo of Vedanta installed on the facade of its headquarters in Mumbai

Volcan has until July 30 to make a firm offer and expects to include a 90 percent acceptance condition, which it could waive at its discretion.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.