Anglo American plc (LON:AAL) today confirmed it has now made a formal offer to acquire Sirius Minerals PLC (LON:SXX), priced at 5.5p per share, and, the offer has been recommended by the Sirius board.
In a stock market statement, the multinational mining major said that the proposed transaction values Sirius at £404.9mln.
READ: White Knight or cynical opportunist? ... City reacts as Anglo American makes £386mln swoop for Sirius Minerals
Sirius’s board, advised by JP Morgan, considers the takeover offer to be “fair and reasonable” and said directors believe the deal terms are “in the best interests of Sirius shareholders as a whole.”
Shareholders will now be required to vote on the proposed transaction at a general meeting.
“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,” said Anglo chief executive Mark Cutifani.
“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.”
Only viable proposal
Russell Scrimshaw, Sirius chairman, meanwhile, explained that the financial review launched in the aftermath of the company’s project financing collapse had failed to unearth any new strategic investors nor did it yield acceptable alternative financing solutions.
Anglo provided the only viable proposal received during the process, though the FTSE 100 firm was only interested in pursuing a 100% control transaction, he added.
In his further comments Scrimshaw struck a regretful chord: “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 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.”
Scrimshaw added: “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.”
He concluded: “This is the context in which your board must assess the offer for your company.”