Anil Agarwal plans to pick 13% stake in Anglo American for $2.4 billion

Move will make Agarwal the 2nd-largest shareholder after South Africa's Public Investment Corp

Anil Agarwal, chairman of Vedanta Resources, plans to buy as much as $2.4 billion of Anglo American Plc shares in the market after a merger proposal failed last year. The full stake would equate to about 13 per cent of Anglo’s stock, making Agarwal the second-largest shareholder after South Africa’s Public Investment Corp. It will give him a strong voice in the company’s strategy as the blue-chip British mining firm cements its recovery from a slump in commodity prices.

While Agarwal said the purchase was a family investment and he won’t make a takeover bid, the brash Indian tycoon offered to merge part of his mining empire with Anglo American last year, only to be rebuffed. The London-based mining group, which is currently looking for a new chairman, is seen as a candidate for a potential break-up through splitting its South African assets from the global mining business.

The purchase will be funded via a mandatory exchangeable bond issued by his holding company, Volcan Investments, and secured by Anglo’s shares, the investor said in a statement on Wednesday. A representative for Anglo American declined to comment.

“It gives him an extremely good seat at the table if there is going to be any corporate activity,” said Jeremy Wrathall, head of mining research at Investec Plc. “We expect that M&A is going to be the next phase and maybe this is firing the starting gun.”

Anglo was the best performing stock on London’s FTSE 100 Index last year, gaining about 288 per cent as the company’s shares benefited from recovering commodities prices and a cost cutting program.

Anglo American, a company founded by the storied Oppenheimer dynasty in South Africa a century ago, is one of the world’s top five mining groups, alongside BHP Billiton, Rio Tinto, Vale SA and Glencore. Its key assets include giant copper mines in Chile, iron ore operations in Brazil and South Africa and De Beers, the iconic diamond producer. “This is an attractive investment for our family trust,” Agarwal, who founded Vedanta Resources, said in the statement. “Anglo American is a great company with excellent assets and a strong board and management team who are executing a focused strategy to drive shareholder value. I am delighted to become a shareholder in Anglo American.” JPMorgan Chase & Co is acting as the sole bookrunner and underwriter on the financing as well as the coupon guarantor. Volcan plans to place the bond on or around April 11, the statement said.

The deal is a coup for JPMorgan, which rose three places to rank second in equity offerings in Europe, the West Asia and Africa last year, according to data compiled by Bloomberg. The holding is similar to Liberty Global Plc’s 9.9 per cent stake in ITV Plc and the Qatar Investment Authority’s holding in J Sainsbury Plc.

Vedanta said in a separate statement that the investment is being made by Volcan alone, and it’s not participating in the purchase.