Anglo American plc, London, said on Jan. 20 it had agreed to buy Sirius Minerals plc, Scarborough, developer of the North Yorkshire polyhalite mine and processing project in northeast England, for 5.5 UK pence in cash per share. The acquisition values the entire share capital of Sirius at about £404.9 million (approximately $530 million at current exchange rates).
The per share price represents a premium of 34.1 percent to the close of 4.10 pence on Jan. 7, Anglo said in a statement. Sirius directors have recommended unanimously that Sirius shareholders vote in favor of the acquisition offer.
“We acknowledge that to many shareholders our decision as a Board to recommend this offer will have come as a shock, and we recognize the returns that this offer would represent are not what either our shareholders or the Sirius Board had previously hoped for,” said Sirius Minerals Chairman Russell Scrimshaw.
However, he said, the Sirius Board – advised by JP Morgan – considers the takeover offer from Anglo American to be “fair and reasonable,” and said the directors believe the acquisition terms are “in the best interests of Sirius shareholders as a whole.”
Anglo American CEO Mark Cutifani said Anglo’s recommended 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.”
In order to become effective, the acquisition scheme must be approved by at least 75 percent of Sirius’ shareholders.
Sirius was worth more than $2.3 billion 18 months ago, according to a Bloomberg report, before its stage 2 funding plans dried up after a $500 million bond offering failed in September (GM Sept. 20, 2019). A successful bond offering would have unlocked $2.9 billion worth of financing needed to complete the polyhalite project.
Scrimshaw said shareholders now face “a stark choice,” and if the acquisition is not approved by shareholders and does not complete, “there is a high probability that the business could be placed into administration or liquidation within weeks thereafter.”
The Chairman explained that while over the past four months following the setbacks in the bond market Sirius was successful in reducing the initial funding needs of the polyhalite project, that despite an extensive global search for a strategic investor, the company to date had not received a firm proposal for a partial project stake.
“The only viable proposal was received from Anglo American in early January, who were only interested in pursuing a 100 percent control transaction,” he said.
Anglo said the project at this stage requires “a significant amount” of further financing to develop and commission the operation.
Anglo expects in the first two years after successful completion of the acquisition, development work on the project to be broadly in line with Sirius’ revised development plan, although it said it intends to update the development timeline, “optimize mine design, and ensure appropriate integration with its own operating standards and practices.” It said development work of approximately US$300 million per annum is expected during this period and subject to the update.
Sirius and Anglo, which announced on Jan. 8 that they were in advanced talks (GM Jan. 10, p. 1), expect the acquisition scheme to be effective by March 31, 2020.