Anglo American surges as India's Agarwal set to invest £2bn

Shares in Anglo American surged on Thursday after Volcan Investments, the family trust of the founder of India’s largest mining company, said it plans to buy up to £2bn worth of shares in the miner.

Volcan, the trust of Vedanta Resources founder and chairman Anil Agarwal, said it intends to finance the investment in Anglo shares through the issuance by Volcan Holdings, a wholly-owned subsidiary, of a mandatory exchangeable bond.

Agarwal said: “This is an attractive investment for our family trust. 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."

The investment will give Volcan - whose merger proposal for Anglo last year failed - a stake of around 12% and make it the second-largest investor after South Africa’s state-run pension fund, Public Investment Corp.

RBC Capital Markets said: “Anglo American has screened as the most compelling value opportunity amongst the diversified miners, and today's move by the Agarwal family should help the shares to begin their re-rating. The strategic 12% stake will provide a powerful position in regards to the future evolution of Anglo American.

“At this point the full intentions of Volcan Investments are uncertain and whether this relates to any Vedanta specific strategy, however we would expect the market will see this as adding an element of future potential corporate activity premium into the shares. On the flip side, the stake, alongside the number one holder the South African PIC, could potentially block any other corporate activity.”

Meanwhile, Credit Suisse said this was an opportunistic move: "While we think a merger between the two companies would be very tough to achieve, if Mr Argarwal sees value in Anglo he has the added option value of some form of deal/partnership further down the line."

At 1534 GMT, the shares were up 8% to 1,290p.