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Sirius shareholders back Anglo takeover

An emotional EGM has seen shareholders support takeover despite anger over the price
March 4, 2020

After a rollercoaster lead-up to the vote, Anglo American's (AAL) rescue pitch convinced enough Sirius Minerals (SXX) investors to get the deal over the line.

The retail-heavy investor base pushed hard against the 5.5p deal, which valued the company at £405m. Many bought in when the company was worth well over 20p, backing Sirius as a local employer at the early stages of the Woodsmith project. The fertiliser project will now join Anglo's slate of development options. 

To pass, the takeover motion needed 75 per cent support by value of shares voted, and a simple majority of shareholders at the meeting or taking part by proxy. In the end, the support was 80 per cent by value and 62 per cent of those voting. Just over 1,300 shareholders were listed as voting, although some split their holdings to vote different ways and these were counted twice. The retail shareholder base had been estimated at 85,000 people. 

The motion passed after an emotional meeting in London, in which Sirius managing director Chris Fraser and chairman Russell Scrimshaw told investors repeatedly there were no other options, with a 'no' vote likely seeing the company going into administration by the end of the month. Mr Fraser reportedly acknowledged his “failure” to get the project to production but challenged investors who maintained a better deal could be found. He also said approaches to the government for support were unsuccessful. 

Mr Scrimshaw said the outcome was a positive for shareholders. "[This vote] provides greater certainty in terms of safeguarding the project, protecting the jobs of our employees, and allowing the community, region and the UK to continue to benefit from the project," he said. 

Woodsmith's prospects are based on mining polyhalite, a relatively untested fertiliser. Under the previous development plan, another $3bn (£2.4bn) is needed to get the twin-shaft mine into production. A major cost is the 37km tunnel between the deposit and the Teesside processing facility. 

Anglo chief executive Mark Cutifani said last month Woodsmith was a potential "tier one" project. Anglo will continue with the $600m, two-year development plan that will see work continuing on one of the shafts down to the 1.6km-deep deposit. Mr Fraser and the rest of the management team will stay on for at least 12 months. Mr Cutifani said the slower option worked for Anglo because it has major spending requirements on the Quellaveco copper project in Peru in the next two years. 

Sirius’ valuation fell heavily twice last year, once in August when it announced a $500m bond issue would be postponed, falling from 15p to 10p, and then in September when the company said it would look for a new financing option. It came up with the new development plan, but could not find a partner to provide this money. During the takeover process, Sirius said a consortium had offered a $680m loan and equity-raise option but maintained this was not possible, as it could not find an institutional investor to back the raise, and even if one had arrived, the due diligence requirements would have seen the company go under before the money arrived. 

The success of the Anglo vote was in doubt from the start because of Sirius’s high proportion of retail investors, thought to hold around half its shares. Out of the institutions involved, and as first reported by Sky News, 7.8 per cent shareholder Jupiter Asset Management opted to back the deal, having previously grumbled about it. New investor Odey Asset Management put its 1.4 per cent against the deal. Odey’s terms for backing the deal were an increase to 7p or Anglo putting ‘final’ on the offer and limiting further negotiation. Anglo declined either option, and still got its way. 

A shareholder group calling itself Fund Sirius Minerals also tried to find an alternative, attempting to raise cash from investors. In a letter to the board at the end of February, the group said the Anglo offer “destroys” the private investor, and questioned why Sirius did not try to raise the $600m through an equity raise or have another go on the bond markets. A $600m equity raise- even if there was demand - would be massively dilutive for shareholders, more than doubling the share count on the current share price.