Sirius shareholders between a rock and a hard place

Sirius shareholders between a rock and a hard place

On 20 January 2020, Sirius Minerals plc received an offer for £404.9 million by Anglo American plc.  For many shareholders, this would mean their investment into the company would more or less hit rock bottom given the loss they would make accepting the offer.

Two years ago, investors were optimistic, buying equity in Sirius at 37p a share. Since then, the share price has dropped dramatically, dipping to 4.1p price on 7 January 2020, just before the parties confirmed in public that they were negotiating. Although the cash offer of 5.5p by Anglo American is marginally higher than the current share price, acceptance of the offer will still result in shareholders making a loss. Mindful of this, Sirius’ board advised shareholders:

‘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.’

Sirius’s key asset is the Woodsmith mine, a potash mine in North Yorkshire. Woodsmith’s commodity is called polyhalite, which is used in fertilisers. It is believed that the ground underneath contains the largest and highest quality deposit of polyhalite in the world. The company has been struggling to secure external funding for the project, having initially put it under review in September 2019.

Sirius previously abandoned a bond sale of £400 million citing ‘market conditions’ including uncertainty created by Brexit and was therefore desperate to gain funding from other sources. With an estimated 1,200 jobs likely to be created by the project, Sirius asked the government to intervene and guarantee approximately £772 million ($1 billion dollars) in bonds. The government’s refusal to do so pushed the company further into crisis. In November 2019, the company was unsuccessful in its attempt to secure £486.9 million in funding from investors.

On 8 January 2020, Anglo American and Sirius confirmed that they were in advanced discussions regarding a rescue of Sirius, originally valued at £386 million. Anglo American believes that the quality of the Woodsmith mine is high and that the ‘project has the potential to fit with Anglo American’s established strategy of focusing on world class assets’.

On 20 January 2020, Anglo American announced a firm offer for Sirius. In its recommendation, the Sirius board noted that ‘We acknowledge that to many Shareholders this offer will come as a shock’, and that following its strategic review ‘it is clear that that no… (other) options are currently available to and in that context Anglo American’s offer is the only feasible option.

Market Tracker will continue to monitor this transaction as it develops.

 

 

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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.