Yahoo Finance Market report: Anglo climbs on talk of Vedanta tie-up
Mining giant Anglo American leapt ahead of its sinking rivals on reports that its top shareholder, Indian metals tycoon Anil Agarwal, is plotting an ambitious move to merge his Vedanta Resources and the FTSE 100 firm’s South African assets.
Mr Agarwal is mulling a long-rumoured approach for part of the mining mammoth after snapping up the rest of Vedanta Resources, a report in the Indian media claimed.
According to the rumours, Mr Agarwal would take Vedanta private, then acquire Anglo through a share swap before later listing the combined company. Mr Agarwal reached a deal to buy the 33.5pc of Vedanta he did not already own on Monday for £778m.
Speculation over a merger between the companies has swirled since the billionaire took a 19.4pc stake in Anglo.
He secured one fifth of Anglo by borrowing from bond investors through a three-year note paying a coupon of 4.125pc. The bonds will be exchanged for either cash or Anglo shares in 2020, meaning that Mr Agarwal has until then to use his influence to force through a deal with Vedanta. Mr Agarwal, who has risen from a scrap metal trader to a mining magnate, denied in February that his investment in Anglo was a precursor to a bigger deal.
BMO analyst Edward Sterck warned investors that the speculation looked “extremely overdone” given Vedanta’s debt load. Anglo’s second largest stakeholder, South Africa’s state-owned pension fund, could also be a roadblock to a deal.
Renewed speculation linking Mr Agarwal with a move for part of Anglo lifted the metals heavyweight as much as 4.1pc before its gains were trimmed by trade war worries ramping up the pressure on global miners.
Anglo closed 34.6p higher at £16.74 while peers Rio Tinto and BHP Billiton slipped back 92.5p to £39.66 and 39.2p to £16.31, respectively, as copper prices slumped to an 11-month low. The metals giants weighed heavily on the FTSE 100 in a lacklustre session hit by the absence of US trading due to Independence Day. The index closed 20.20 points lower at 7,573.09.
Troubled telecoms firm TalkTalk rallied 5.3p to 110p after its second largest shareholder Toscafund Asset Management’s stake building stirred up takeover chatter. After snapping up a further 1.1pc of its shares, the hedge fund now has a 16.2pc slice of TalkTalk. Tosca increased its stake just days after chairman Sir Charles Dunstone tightened his grip on the company, buying a further £560,000 of shares to bring his stake to 28.6pc.
Satellite operator Inmarsat continued to fluctuate ahead of Friday’s deadline for a bid from rival Echostar. The US company will need to make an offer of at least 750p to deliver a knockout bid, RBC Capital Markets analyst Wilton Fry speculated as Inmarsat rallied 12.2p to 523.6p.
He added that there is “a very high probability” of a bid from Echostar, arguing that delaying a swoop for another six months risks it losing out to another bidder. Japanese giant SoftBank is another “very credible bidder”, according to RBC.
Stagecoach climbed 7.6p to 157.8p after Liberum argued in an upgrade to “buy” that its dividend cut has eased the pressure on the train and bus operator to win franchises to ensure shareholder returns.
Vesuvius slipped 18.5p to 570.5p after Bank of America Merrill Lynch downgraded the ceramics business to “underperform”.
