Companies

Anil Agarwal exits Anglo American with $500-m gain

Our Bureau New Delhi | Updated on July 26, 2019 Published on July 26, 2019

Anil Agarwal   -  Bloomberg

Anil Agarwal has encashed his investment in Anglo American plc. A Vedanta statement said Cairn India Holdings Ltd (CIHL), an overseas subsidiary of Vedanta Ltd, is making a gain of $100 million by entirely unwinding the investment made through Volcan Investments.

Agarwal is the Executive Chairman of Vedanta Resources. Volcan (Agarwal’s family trust) and Vedanta Resources are the parent companies of Vedanta Ltd. The total gain Agarwal is said to be making by divesting the 21 per cent stake that Volcan owned in Anglo American is close to $500 million.

‘Attractive investment’

'”At the time of Volcan’s initial investment, I explained that this was an attractive financial investment...,” Agarwal said in a statement. The statement said the exit was made ahead of schedule.

“Volcan will exercise the early exchange option available to it on July 26 and, consequent to this, the full exchange of its two issues of mandatory exchangeable bonds secured by shares in Anglo American will settle on August 12. The share price of Anglo American has close to doubled since Volcan invested, delivering attractive gains to all investors,” the statement said.

 

PTI adds:

In March 2017, he had begun buying into Anglo American through a JP Morgan mandatory convertible bond. By the time he bought a second tranche in September 2017, his stake in the mining group totalled to 19.3 per cent.

The bonds were to mature next year but Agarwal decided to exercise a call option and take profits on his investment.

Agarwal is said to have made about $500 million before costs from the deal.

“At the time of Volcan’s (Agarwal’s family trust) initial investment, I explained that this was an attractive financial investment in a great company with excellent assets and a strong board and management team,” he said in a statement.

“This has turned out to be the case, with our target returns achieved even sooner than expected. The share price of Anglo American has close to doubled since Volcan invested, delivering attractive gains to all investors.”

In a separate statement, Vedanta Ltd said its overseas subsidiary, Cairn India Holdings Ltd (CIHL) will exit its investments in Anglo American Plc.

In December 2018, CIHL purchased an economic interest through a structured investment in equity shares of Anglo-American Plc, from Volcan Investments - Agarwal’s family trust, for a total consideration of Rs 3,812 crore.

“CIHL and Volcan Investments Ltd have agreed to unwind entirely the structured investment entered between them in December 2018, ahead of the originally envisaged schedule,” Vedanta said in a statement.

“With this, Volcan will exercise the early exchange option available to it on July 26, 2019, and consequent to this the full exchange of its two issues of mandatory exchangeable bonds secured by shares in Anglo American plc will settle on August 12, 2019.”

This structure was to mature in parts in April 2020 and October 2020 but Cairn is exiting the same ahead of the originally envisaged schedule.

“The share price of Anglo American has close to doubled, since Volcan invested, delivering attractive gains to all investors,” the statement said.

The investment by CIHL, which was entered into as part of its cash management activities, has delivered a net gain of over $100 million in the 8 month period it was held, it added.

Cash proceeds from the settlement of the transaction will be paid to CIHL on August 13, 2019.

Chief executive Srinivasan Venkatakrishnan said: “We are pleased this structured investment has achieved a superior return for CIHL, as we expected when it was entered into. Our strategy continues to be to focus on our existing businesses, where we believe that there are significant opportunities to unlock their full potential.”

“The unwinding reflects our disciplined approach to treasury management and capital allocation together with our commitment at all times to act in the interests of all shareholders,” he said.

Following the redemption of the structured instrument, completed with due Board approvals, CIHL will have no further economic exposure to Anglo American plc shares.

Published on July 26, 2019
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