£404.9m takeover deal agreed for listed fertiliser developer
Mining giant Anglo American PLC has agreed terms for a £404.9m acquisition of listed Scarborough-based Sirius Minerals.
If shareholders approve it, the deal will see Sirius shareholders entitled to receive 5.50 pence for each Sirius share. Sirius directors intend to recommend unanimously that their shareholders vote in favour of the acquisition.
Sirius Minerals is behind a North Yorkshire polyhalite mine project, which saw its $500m/£390m financing plan collapse in September last year.
The company subsequently published a review which said that parts of the mining project would be delayed, while it sought to raise an initial US $600m/£469m by the end of March 2020 to fund the construction of the mineshafts and first section of tunnel only.
Sirius wants to extract polyhalite, a form of potash containing potassium, sulphur, magnesium and calcium. The product would be used by farmers to help improve crop yields.
Russell Scrimshaw, chairman of Sirius, said: “We were successful in reducing the initial funding needs of our project to map out a way to develop it in a way that better aligned risk to capital providers but, despite an extensive global search for a strategic investor, we have 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% control transaction.
“Alternative financing solutions have been pursued in parallel to the strategic partner process, which resulted initially in a non-binding proposal being received in December 2019 and subsequently a revised proposal being received on 9 January 2020.
“However, in the opinion of the Sirius Board and its advisers, the terms of the proposal received and the conditions attached are not acceptable in their current form.
“We acknowledge that to many shareholders our decision as a board to recommend this offer will have come as a shock.
“Your board deeply regrets that we could not deliver the complete stage two financing in 2019 despite a very broad and thorough process.
“Going into the strategic review the Sirius Board’s strong preference was a solution that allowed current shareholders to participate as fully as possible in the future development of the project.
“Following the strategic review process it is clear that no such options are currently available and in that context Anglo American’s offer is the only feasible option.
“We recognise the returns that this offer would represent are not what either our shareholders or the Sirius Board had previously hoped for.
“Given the current cash constraints of Sirius, and lack of realistic and deliverable alternative financing and development options, we believe this to be a fair approach from Anglo American, a company committed to approaching the project in the right way, and with the resources to complete the job.
“We now face a stark choice. If the acquisition is not approved by shareholders and does not complete there is a high probability the business could be placed into administration or liquidation within weeks thereafter.
“This outcome would most likely result in shareholders losing all of their investment, as well as put the future of the entire project, and its associated benefits for the local area and the UK, at risk.”
Anglo American said Sirius Minerals’ project, “has the potential to become a world-class, low-cost and long-life asset.
“At this stage, it requires a significant amount of further financing to develop and commission the operation that has proven challenging for Sirius to procure on an economic basis.
“In the first two years after successful completion of the acquisition, development work on the project is expected to be broadly in line with Sirius’ revised development plan, although Anglo American intends to update the development timeline, optimise mine design and ensure appropriate integration with its own operating standards and practices.
“During this period and subject to the update, development work of approximately US$300m per annum is expected.”
Mark Cutifani, chief executive of Anglo American, said: “Anglo American’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.
“We intend to bring Anglo American’s financial, technical and product marketing resources and capabilities to the development of the project, which of course would be expected to unlock a significant and sustained associated employment and economic stimulus for the local area.”
Northern Powerhouse Partnership Director, Henri Murison said: “This offer from Anglo American which the Board of Sirius Minerals is recommending to its shareholders is welcome news for the area and will hopefully bring some certainty to the 1,200 staff working on the project across its sites including Wood Smith Mine near Whitby and in Scarborough.
“The Sirius Minerals project gives these communities – and particularly their young people – real opportunities they would otherwise have to leave the area to secure with the prospect of a further 2,500 high-skilled jobs being generated once the mine is up and running.
“Sirius has already invested over £1 billion in the project. If the Government is genuinely serious about levelling up and narrowing the north-south divide, it will need to back privately led infrastructure projects like this in future.”