Sirius Minerals has agreed a £405m takeover deal with Anglo American, with the global mining giant agreeing to buy the North Yorkshire polyhalite fertiliser mine and Teesside processing plant to avoid the project collapsing into liquidation.
The future of Sirius Minerals' massive £3bn project near Whitby had been thrown into serious doubt last September, after it failed to secure vital Stage 2 funding and the government failed to step in with vital support.
The company subsequently announced that it would be slowing the pace of development on the project and undertaking a six-month strategic review to explore alternative financing solutions, and began discussions with potential investors.
The deal announced by the two companies today (Monday) outlines that a recommended cash offer of 5.5p per Sirius Minerals share had been agreed. The deal values the company at £404.9m and Anglo said it could provide a huge jobs and economic stimulus to the area.
The buyout still requires the approval of shareholders, who have been urged to accept the offer, with Sirius warning that the company will collapse into liquidation within weeks and lead to heavy job losses if it does not go ahead.
Anglo American say they identified the project as being of potential interest some time ago.
Mark Cutifani, Anglo American chief executive, said: “Anglo American’s recommended offer provides greater certainty for Sirius shareholders, employees and wider stakeholders. 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.
“The addition of the project supports our ongoing transition towards supplying those essential metals and minerals that will meet the world’s evolving needs – in terms of the undoubted need for cleaner energy and transport, and providing infrastructure and food for the world’s fast-growing and urbanising population. Our development of the project in the years ahead reinforces the quality of our portfolio and our long-term growth profile, further enhancing our ability to deliver leading returns on a sustainable basis and enduring value for all stakeholders.”
Russell Scrimshaw, chairman of Sirius, said: “We acknowledge that to many shareholders our decision as a board to recommend this offer will have come as a shock. The 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 to us and in that context Anglo American’s offer is the only feasible option.
“We also recognise the returns that this offer would represent are not what either our shareholders or the Sirius board had previously hoped for. We regret that we are not able to deliver on our long-term goal of Sirius being able to deliver the project into production, although we assure all stakeholders that the team has worked tirelessly and diligently over the last nine years to try and achieve that.
“However, 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 that 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.
“This is the context in which your board must assess the offer for your company and, having given due consideration, your board believes the acquisition to be in the best interests of Sirius and all of its stakeholders, providing shareholders with some financial return.”
The offer is 34% up on Sirius’s 4.10p closing price on January 7, but well below the peak of around 45p before the firm hit financial trouble.
Subject to approval by at least 75% of Sirius value shareholders, the deal is expected to become effective by 31 March 2020.