Crispin Odey’shedge fund has attacked Anglo-American’s “unjust” takeover bid for Sirius Minerals, saying the £405m offer does not represent a fair price for shareholders in the troubled fertiliser miner.
Odey Asset Management, which owns 1.3% of Sirius, said it would vote against the mining giant’s 5.5p-a-share bid for the company, which plans to dig the UK’s first deep mine in 40 years under the North York moors.
In an open letter to Anglo’s boss, Mark Cutifani, and Chris Fraser, the chief executive of Sirius, the London-based fund argued that Anglo had stopped short of making a “final” offer so that it could raise its bid to see off any potential counter bid for the company.
Odey said it believed Anglo would be willing to “bid substantially more” for Sirius if a counter bid for the company emerged, which it said proved that the existing offer did not represent a fair price for the company.
“It is Odey’s belief that Anglo American’s current offer does not represent fair value for shareholders in Sirius,” said the letter, which was signed by Odey’s fund manager, Henry Steel. The hedge fund said it would vote against any offer that was not final or that was less than 7p a share.
The existing takeover offer would wipe out the investments of thousands of small shareholders, but it still won the support of the Sirius chairman, Russell Scrimshaw. He said last month it was “the only viable proposal” to save the company’s multibillion-pound project to develop the Woodsmith fertiliser mine under the North York moors.
Around half of Sirius’s shareholder base is made up of 85,000 retail investors, many of whom live in the Yorkshire area and have supported the miner’s ambitious plans to become the world’s biggest producer of a potent fertiliser called polyhalite.
The individual shareholders are thought to have lost the majority of their investment following a 90% collapse in the company’s share price in recent years. Sirius shares reached a high of 45.23p a share in September 2016, which valued the miner at £1.5bn. The shares now change hands at 5.1p each.
The market value of Sirius has been steadily diluted by issuing new shares in the company to raise extra funds to develop the mine. The company raised £370m at a price of 20p a share in 2016, before returning to shareholders to raise another £327m at 15p a share last year.
In total, Sirius managed to raise $1.2bn (£920m) to develop the Woodsmith mine, but it ran into trouble finding investors to hand over a further $3.8bn to complete the plans.
“We now face a stark choice,” Scrimshaw said last month. “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.”
Odey said the project could still prove to be lucrative for an investor willing to fund the development costs of the Woodsmith mine. It claims recent company accounts suggest that the business could be worth £895m if it finds funding – more than double Anglo’s bid.
The higher valuation was supported by Sirius Minerals’ external auditors at PwC. Odey said Anglo’s takeover offer made “a mockery of both internal and external audit at Sirius”.
Its letter said: “Odey struggles to see how the board of Sirius, including the chief financial officer, can recommend the offer to shareholders as being ‘fair’ only four months after these accounts were published.”
The fund added that it was “unjust” that Sirius Minerals shareholders were held accountable “for the apparent misrepresentation of the equity value in Sirius’s accounts and technical reports, and can fully appreciate the frustration displayed by so many Sirius shareholders.”
Shareholders will vote on 3 March on whether or not to accept Anglo’s offer, which needs the support of at least 75% of voting investors in order to move ahead.
