Page 10 - AMANGO 2017 CASE STUDY 2

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Last week, a London-based Indian born billionaire industrialist, Anil Agarwal, through his Vedanta
Resources Plc Group (VR), made a surprise bid for and acquired 20% of the AMANGO group. Having

announced during Indian prime minister, N. Modi’s state visit to South Africa in 2015 that VR wanted to
expand its footprint in South Africa, Anil had in that same 2015, first made a merger approach to
AMANGO, stating, ‘’it is a good match. One and one wasn’t going to be two, but 11.” At current prices,
AMANGO isn’t only cheap but is still attractively priced, quoting at price-earnings multiple of 7.48,
compared to VR’s 13.2.

Anil’s interest in AMANGO lies in AMANGO’s status as the world’s leading diamond exploration, mining
and marketing company. India’s diamond production is negligible, but it is the largest consumer of rough
diamonds in the world, importing 80% of total global production with an import bill of US$15 billion,
besides being a hub for processing the stones. Anil gets his way each time he sets his sight at any deal!
His VR has acquired businesses from AMANGO in the past and has also signed an agreement with the
South African government for sharing advanced mining technology. Anil is very close to the Indian Prime

Minister, whose government holds 30% of VR and has been looking to use the BRICS arrangement, to
which South Africa is part, to bring AMANGO’s expertise to develop the Indian diamond sector. Anil has
also hired AMANGO’s previous CEO as his adviser, giving him enhanced insight into the mechanics of
the group.

Just as the markets were speculating that Anil may be seeking to join forces with PIC, forming a 35%
voting block on the Board to push AMANGO to unbundle its non-core assets in South Africa, the
AMANGO Board has received an offer, this time, a potentially hostile takeover offer from Anil’s VR. The
AMANGO Group CEO, M. Cutika, has before its evaluation, out-rightly stated, ‘we should reject it’’ In
essence, VR, in consultation with PIC, is seeking to acquire 60% ownership of AMANGO, to unbundle its

non-core copper and iron business in South Africa (held by AMANGO South Africa Limited [AMANGO
SA], a 100% wholly-owned subsidiary of AMANGO, valued at US$5,500m and contributing 25% to group
earnings) and then absorb its Platinum and Diamond businesses into the VR Group.

The unbundled non-core business will be constituted as South Africa’s new mining champion, with PIC
gaining majority control, to satisfy in part, the South Africa government’s thirst for ‘radical economic
transformation’ ahead of the 2019 general elections, in which a new pro-transformation political party –the

EFF, is gaining ground at the ruling party’s expense. In return, the South African government will facilitate
VR’s entry into the Indian diamond market! VR is offering a premium of 50% (share-for-share exchange)
to AMANGO’s shareholders, to acquire the extra 40% needed.

The CharterQuest Institute has compiled the following basic data pertinent to the deal:

Vedanta Resources Plc
Corporate Head Quarters London and listed on London Stock Exchange
Main metals Zinc and Aluminiun
Gearing by market value (D/D+E) 69%
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