LONDON – Billionaire Anil Agarwal faces investor resistance to his $1-billion bid to buy out minority shareholders in Vedanta Resources and take the London-listed Indian miner private.
Vedanta, chaired by its 64-year-old founder Agarwal, on Monday announced that its independent board directors were prepared to back an 825p-a-share bid from Agarwal's family trust, Volcan, to acquire the 33.5% of the company that it does not already own and delist the group.
Under the proposal, Volcan would spend £778-million ($1-billion) buying out minority investors in a deal which would value Vedanta as a whole at about £2.35-billion.
But a large minority shareholder in the mining group told Reuters the bid was too low and that his investment firm will raise concerns about the deal with Vedanta's independent directors.
"We think that this offer is very opportunistic and massively undervalues Vedanta," said the shareholder, who declined to be identified.
"It's the worst possible time for minority shareholders to be taken private," he said, adding that he believed Vedanta was worth between £11 and £12 a share.
It follows a warning from Barclays analysts on Monday that the bid by Indian industrialist Agarwal was "opportunistic" and may encounter "some resistance from minority shareholders."
Agarwal, who started out as a scrap metal trader, has expanded Vedanta into a natural resources group with operations spanning oil and gas, metals, including iron ore mining and aluminium smelting, and power generation.
It was listed in London 15 years ago and owns just over 50% of India-listed Vedanta, which has a market value of about $12.5-billion, and a controlling stake in Zambia's Konkola Copper Mines (KCM).
Taking the London-listed company private would help to simplify the complicated corporate structure behind Agarwal's business interests.
Volcan's bid comes after Vedanta shares, which rose above £11 in February last year, fell to their lowest level in a year last week, closing at 632.4p on June 25 in London, according to Thomson Reuters data.
The stock has slumped following a deadly incident in India in May, when police fired on protesters seeking the shutdown of a Vedanta-owned copper smelter, killing 13.
The large minority shareholder told Reuters that Volcan's bid did not reflect Vedanta's prospects and potentially positive catalysts for the share price.
These include the arrival of a new CEO, Srinivasan Venkatakrishnan, in August and the KCM business starting to turn cash flow positive, the investor said.
A spokesman who acts for both Vedanta and Volcan declined to comment.
Vedanta shares were above the level of Volcan's bid on Tuesday, closing up 1.3% at 828.4 pence.
As well as 825p-a-share in cash from Volcan, minority investors will also be entitled to receive the dollar-denominated dividend the miner is due to pay next month, which will take the total consideration to 856p-a-share at exchange rates on Friday, which was the last trading day before Volcan's bid was announced.
Volcan has until July 30 to make a firm offer and expects to include a 90% acceptance condition, which it could waive at its discretion.