Vedanta said to be mulling merger with Anglo American unit

According to India's Livemint, which cited two people with knowledge of the plan, the merger of the two units would create a company valued at around $7bn and give Volcan Investments - the Agarwal family trust that owns 66.5% of Vedanta Resources - control of the merged entity.

On Monday, Volcan offered to buy the shares in Vedanta Resources that it does not already own for £778m and then delist the FTSE 250 company from the London Stock Exchange, as part of a plan to simplify the group's structure.

RBC Capital Markets analyst Tyler Broda noted that it's been nearly 15 months since Agarwal's Volcan acquired its stake in Anglo via a mandatory convertible and said this marks the first indication of corporate activity surrounding the stake.

"We have long seen Volcan's presence as a potential catalyst to reform the Anglo American structure which, our analysis suggests, hides value in high quality assets in diamonds, copper and coal in part owing to the higher market risking applied to its circa 25% South African operation," Broda said

"We calculate that Anglo American is trading on 3.8x 2019 versus peers at 4.8x. This however is influenced by the beleagured Glencore multiple and the emerging market exposure in Vale. With Rio Tinto and BHP trading on 6.3x and 5.4x; there is clear rerating potential for an ex-South Africa Anglo American, should a transaction as proposed above develop."

At 1000 BST, Anglo shares were up 3.7% to 1,700.20p.