Agarwal will likely make about $500 million from his investment and pocket between $200 million and $300 million after fees, according to people familiar with the matter who asked not to be identified. It’s a small gain considering Anglo shares had soared more than 80% since March 2017, when Agarwal first announced he would buy a stake.
“As Anglo American’s share price climbed, it became even more clear that Agarwal lacked the firepower to work an approach,” said Ben Davis, an analyst at Liberum Capital Markets. “He’s made far less than he would have done with a straight investment, though his bankers would have done well out of it.”
Anglo shares fell 4.9% to 2,081 pence as of 10:43 a.m. in London.
The billionaire maintained that his interest in Anglo was a family investment and he didn’t intend to make a takeover offer.
The biggest challenge Agarwal would have faced is the surge in Anglo’s share price since he bought his first tranche. His two listed ventures, Vedanta
Ltd. and Hindustan Zinc Ltd., slumped over the same period making any kind of merger hard to execute. At the same time, presumed allies such as South Africa’s Public Investment Corp. looked less aligned.
Agarwal amassed his stake through a mandatory exchangeable bond issued by Volcan and secured by Anglo shares. The bonds were issued in March and September 2017 and financed the $3.5 billion pound ($4.4 billion) investment.
Volcan now plans to call the exchangeable bond, according to a statement released late Thursday, meaning investors owning the Volcan bond will now receive Anglo shares. The mining company could see higher trading volumes in the coming days as the new owners of Anglo shares close out the short positions used to hedge, said RBC Capital Markets.
“The unwind of this structure will remove, in our view, any tangible potential for Volcan to pursue large-scale corporate activity with Anglo American
going forward,” said Tyler Broda, an analyst at RBC. “We would not expect to see any fundamental derating in Anglo American
on the back of this adventurous bond coming to an end.”
Agarwal’s decision to unwind his investment in Anglo and take the investment proceeds is a positive for Vedanta
Ltd., an Indian mining company that’s controlled by the billionaire, said ICICI Securities Ltd. analysts led by Abhijit Mitra.
Resources’ $1 billion 6.125% note due 2024 rose 2.1 cents on the dollar to 94.17 cents, the biggest gain since January, according to Bloomberg-compiled prices.