Anglo American (AAL) has formally made an all-cash takeover bid for Sirius Minerals (SXX)* at 5.5p. The offer - valuing the company at £405m - leaves many shareholders in the red after Sirius’ dramatic fall in value since August 2019, when it paused and then later pulled a $500m (£385m) bond offering that would have unlocked a $2.5bn loan from JP Morgan Cazenove. Now, Sirius says it would likely collapse “in weeks” if shareholders do not accept the 5.5p offer.
Sirius has been developing the Woodsmith polyhalite mine in Yorkshire, which involves sinking two major shafts a mile deep and building a 37km ore transport tunnel to the port at Teesside.
In its offer, Anglo underlined the major spend still needed for the mine to get up and running, and has forecast spending $600m over two years once the deal is complete to continue sinking the service shaft and reaching the orebody.
Anglo chief executive Mark Cutifani said the takeover was in everyone’s best interests. “[This] offer provides greater certainty for Sirius' shareholders, employees and wider stakeholders, while bringing the prospects for the development of this potential tier 1 project closer to reality,” he said. This adds to Anglo's capex requirements in a period of balance sheet strength, and the major spend would come as construction is winding down at the Quellaveco copper mine in Peru. Mr Cutifani has said previously he would stay on in the top job until Quellaveco is in production, which is expected in 2022.
The shareholder vote will be critical for Anglo and Sirius. They need 75 per cent support from the largely retail ownership for the takeover to happen. Sirius chairman Russell Scrimshaw said it was a tough recommendation to make. “We acknowledge that to many shareholders our decision as a board to recommend this offer will have come as a shock,” he said. JP Morgan Cazenove and Lazard have recommended that the board back the deal.
Mr Scrimshaw said the company could not find a strategic investor to fund the next two years of work at Woodsmith under acceptable terms, and called the Anglo takeover the “only feasible option”.
In the offer document, Sirius said it received a $680m loan offer from an unnamed consortium on 9 January, but by the time it could have met the terms of the loan, the company would have run out of cash and gone into liquidation or administration.
Under the Anglo plan, Sirius management and employees would stay on for a year after the deal closing, with the senior management keeping their existing bonus and long-term incentive scheme.
The vote details will be sent to shareholders within 28 days, and if that passes Sirius expects the takeover to be completed by the end of March. Private investor lobby group Share Society said in a statement it would support Sirius shareholders in the process. Director Paul de Gruchy said some investors would have “lost money that they could not afford to lose and/or which they will not be able to replace”. Mr de Gruchy said ShareSoc would look at whether shareholders were misled by Sirius marketing materials. Local media reports echoed the impact of the Sirius share price crash, with shareholders around Whitby hit particularly hard.
