Hedge fund Odey Asset Management has hit out at the £405m takeover offer from Anglo American (AAL) for potash miner Sirius Minerals (SXX). It will refuse to vote in favour of the buyout.
In a letter to Sirius Minerals’ management, Odey fund manager Henry Steel said he believes the current 5.5p per share offer ‘does not represent fair value for shareholders in Sirius’ and called on Anglo American to up its offer.
The hedge fund, which has recently built up a 1.29% stake in Sirius, said it would instead vote in favour of any bid at 7p or above.
LURING RIVAL OFFERS
It noted that when making its offer, Anglo American did not declare it as final.
This is because, in Odey’s view, ‘there is a risk of both the deal failing at its current level, and of an interloper at a later stage.’
In the letter Steel added, ‘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.’
The hedge fund noted Sirius’ half year results for the six months to 30 June 2019 suggested that Sirius’ total equity value is £893.1m, a value 120% higher than the Anglo offer, which has been recommended by Sirius’ board of directors.
It added, ‘Odey believes that it is unjust that Sirius Minerals shareholders are 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.’
PHANTOM WHITE KNIGHT
The Odey letter comes after reports that a group of shareholders launched a last-minute bid to find an alternative to the £405m takeover deal by trying to drum up interest from fellow private investors and institutional backers in other financing options, such as a fundraising from selling new shares.
That way the company could retain its independence and London listing and would save many long-standing shareholders from being forced to crystallise losses on their investment in the company.
The share price of Sirius Minerals collapsed six months ago when it admitted it was struggling to raise money to fund the build of its Woodsmith potash mine in Yorkshire.
Despite discontent from some investors, the board of Sirius Minerals insists the Anglo offer is likely the only way for shareholders not to lose all the money they invested, while safeguarding jobs and the project’s development.
It warned again last week that if shareholders don’t approve the Anglo American acquisition, ‘there is a high probability that the Sirius board will be forced to place the business into administration or even liquidation.’
Shareholders will vote on the Anglo American buyout on 3 March.
