Vedanta Resources promoter Anil Agarwal was just a scrap trader in Mumbai at the age of 20. Nearly four decades later, he is taking on Anglo-Swiss mining giant Xstrata and China Metallurgical to buy Anglo American’s zinc business.
The London-based metals producer has set his sights on the nearly $1-billion assets to establish his lead as the world’s biggest manufacturer of zinc when the demand for the metal is soaring in
Hindustan Zinc, which Mr Agarwal bought from the government in 2002 for Rs 445 crore, is bidding for the zinc businesses of South African resources company Anglo American. Anglo, once a target for takeover for Xstrata, is selling assets and cutting jobs to reduce debt and increase revenues from copper and iron ore.
“Hindustan Zinc’s move will give it access to technology and economies of scale in trading and distribution of the metal,” said Shamik Bose executive director, commodity, currency & interest rate futures markets at Microsec Commerze. “Since zinc consumption is growing in
The demand for zinc in
What’s at stake is Anglo American’s Skorpion Zinc in southern
Mr Agarwal is no stranger to acquisitions. He has won some and lost some, and battling some more. But this one could be different given his enhanced financial strength and experience.
His climb to the top of the resources heap in
The biggest boon for him was when the government sold strategic stakes in Bharat Aluminium, or Balco, and Hindustan Zinc. He managed to buy both the companies which were inefficiently run, but possessed enormous resources. These acquisitions propelled him to the top of the chart and seek a listing on the London Stock Exchange, the first ever for an Indian company. Mr Agarwal was not fluent in English when he landed in Mumbai, but now, top investment bankers such as John Mack of Morgan Stanley, discuss opportunities with him.
Hindustan Zinc’s net profit rose to Rs 2,802 crore in the nine months to December 2009, from Rs 68 crore in 2002. Its sales rose to Rs 5,518 crore during the same period, from Rs 1,470 crore. Unlike the past acquisitions, Mr Agarwal is now rich with cash, which some of the rivals for Anglo American’s assets such as Xstrata may not find easy to match. He is also audacious when it comes to bidding.
In 2001, he bid Rs 550 crore for half of Balco with just about Rs 25 crore in hand. He won the competition against
“HZL’s healthy cash reserves could work to its advantage in this bid,” said Reena Walia Nair, base metals analyst at Angel Broking. “If it is aggressive and wants to really clinch the deal, it has the funds to back its bid.” HZL is a zero debt company and has reserves of Rs 10,700 crore. Its smelter capacity is at 8.8 lakh tonne and is followed by Xstrata, with a capacity of around 7.3 lakh tonne.
But this deal could be more difficult given that zinc is at around $2,400 per tonne, up more than 50% in the last 18 months. Others may also bid high. Mr Agarwal, who’s building a university for a billion dollars, has shown the tenacity to fight for what he wants even if he ends up losing a bid.
The most audacious was an unsolicited offer in the 1990s to buy out Alcan’s Indian unit, Indian Aluminium, which the parent company resisted. It was subsequently sold to Hindalco Industries. That was when the country did not have any meaningful takeover regulations.
Sterlite Industries, a Vedanta subsidiary, is believed to have recently joined the biggest
Mr Agarwal is also in a legal dispute with the government of
Source: Economic Times