Current offer for Sirius Minerals does not represent fair value for shareholders, says Odey Asset Management

An asset manager today claimed that the current recommended offer for Sirius Minerals, the firm behind a giant mine in North Yorkshire, fails to offer fair value for the company's shareholders.
Odey Asset Management, through funds that it manages, has recently become a shareholder in Sirius Minerals plc and acquired voting rights.Odey Asset Management, through funds that it manages, has recently become a shareholder in Sirius Minerals plc and acquired voting rights.
Odey Asset Management, through funds that it manages, has recently become a shareholder in Sirius Minerals plc and acquired voting rights.

Odey Asset Management believes that the lack of a “final” offer suggests that Anglo American would be willing to bid substantially more for Sirius.

Earlier this week, the chief executive of Sirius Minerals said that a planned takeover from Anglo American was the only viable pathway forward for the company.

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Although he understood shareholders' disappointment with the planned offer from Anglo American, Chris Fraser warned that, if the takeover does not go ahead there is a "high probability" that Sirius will go into administration.

Last month, Anglo American officially submitted a £405m rescue bid for Sirius which has been struggling to raise financing for the project near Whitby which will support thousands of jobs in the region.

Anglo has bid 5.5p per share for Sirius, which is less than a quarter of the 22.4p valuation just a year ago.

Odey Asset Management, through funds that it manages, has recently become a shareholder in Sirius Minerals plc and acquired voting rights.

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In a public letter, Odey Asset Management said: "Like Anglo American plc, Odey sees material upside in the Sirius investment case for an entity that has the capability to finance the construction of Sirius’s principal asset, the Woodsmith Mine.

It added: "Indeed, it is this lack of financing which Odey believes is the predominant reason for Sirius’s share price to have fallen to its current level, a level at which the most of shareholders have lost the majority of their invested capital.

Odey notes that Anglo American have not declared their offer for Sirius as a “final” offer. Odey said it believes Anglo American have chosen not to declare their offer as “final” because there is a risk of both the deal failing at its current level, and of an" interloper" at a later stage.

The letter added: "If such an interloper were to appear, Anglo American would, rationally, wish to retain the option to counter bid at a higher level. It is Odey’s opinion that such an interloper would most likely appear between the date that Sirius shareholders vote on the proposed transaction, and the date of the Court Hearing.

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"The lack of “final” offer, in Odey‘s opinion, suggests that Anglo American would be willing to bid substantially more for Sirius, with the investment case remaining highly attractive for Anglo American, even at a materially higher bid level.

"It is Odey’s belief that Anglo American’s current offer does not represent fair value for shareholders in Sirius. In particular, Odey notes that Sirius’s most recent accounts suggest

that Sirius’s equity value is £893.1m, a value of 120 per cent higher than Sirius’s Board’s recommended offer.

The letter added: "The recommended offer seems, to Odey, to make a mockery of both internal and external audit at Sirius."

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Odey has committed to vote against any Anglo American offer that is not designated as final at this level.

The statement added: "If Anglo wish to retain the option to counter bid, Odey accepts that rationality, and hence also commits today to vote in favour of any bid at 7p or above."

Odey notes that the "very low voter turnout at Sirius AGMs gives greatly magnified power to Sirius shareholders who do vote".

In response. a Sirius Minerals spokesperson said: “We recognise that the current offer does not represent the value that the board and shareholders had previously hoped for. However, given the situation the company finds itself in, we face a stark choice.

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"As such, the board has been unanimous in recommending that shareholders vote in favour of the deal. In the event of this transaction being unsuccessful there is a high probability that the business will need to be placed into administration or liquidation.”

Earlier this week, The Yorkshire Coast Mineral Association said it would be tragic if plans to build a giant mine in the North York Moors had to be scrapped due to lack of funding.

The group has issued a statement offering its full support for Sirius Minerals' mine, which is expected to create thousands of skilled, long term jobs.

The Yorkshire Coast Mineral Association represents the mineral rights holders who are leasing their minerals to the project. In its statement, the group acknowledges that it has a vested interest in the mine becoming fully operational as a stable business.

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The statement added: "But YCMA members are also members of the local community and can see the many benefits that the mine will bring to this part of North Yorkshire."

The group said it "fully acknowledged" the disappointment that shareholders who have backed the project will be feeling.

It continued: "Indeed, many of our members also invested and will be sharing the loss.

"But now is the time to support the scheme so that the multiple benefits to the local community and national economy can be unlocked. It will be tragic if the future benefits of the project are left to wither on the vine."

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"The Yorkshire Coast Mineral Association announces its full support for the proposed Sirius polyhalite mine in North Yorkshire and urges that the project must continue.

"It will bring many benefits to the Whitby and Scarborough area, " the statement said. "There will be the direct benefits from newly created jobs and employment but also many indirect benefits to the wider community.

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