Sirius shareholder Odey comes down on Anglo’s “mockery” bid

London-based hedge fund Odey Asset Management has launched an aggressive attack on Anglo American’s £405 million (about $524m) planned takeover of Sirius Minerals (LON:SXX), saying it does not represent fair value for shareholders.

The fund, which has a 1.3% interest in the struggling British junior, warned it would vote against any offer at the current level of 5.5p a share that is not designated “final.”

In an open letter to the chief executives of Sirius and Anglo, Odey slammed the fertilizer company’s board for accepting the bid, which it described as a “mockery.” 

“Odey believes Anglo American [has] 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,” reads the letter, signed by Odey’s fund manager Henry Steel. 

“The lack of a ‘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 fund said it won’t settle for anything less than at least 7p a share, a price which is likely to deliver good returns on Odey’s investment. It noted that Sirius’s most recent accounts in September show an equity value of £893.1 million, 120% above Anglo’s £405 million (about $526m) bid.

Sirius acknowledges that the current offer does not represent the value that its board and shareholders had previously hoped for. It warns, however, that if not approved the company would likely be placed into administration or liquidation. 

The London-based junior, which is midway through building its Woodsmith fertilizer mine beneath the North York Moors national park, has seen its share price collapse in the last five months. The mine developer warned last September that a multibillion dollar funding for the next stage had fallen through, saying it only had enough cash to last another six months. 

The company has already raised £920 million ($1.2bn) to develop Woodsmith and received the backing of thousands of local retail investors, but needs a further $3.8bn to turn it into the world’s biggest producer of polyhalite, a multi-nutrient fertilizer.

As a last resource, Sirius launched in November a rescue plan involving the participation of a potential strategic investor and a revised two-stage development plan for the mine, poised to be one of the world’s largest in terms of the amount of resources extracted.

The move by Odey comes as shareholders prepare to vote on the deal on March 3. Investors with shares representing 75% of the company need to vote in favour for it to go ahead.

Sirius Minerals said on Wednesday its board was unanimous in recommending shareholders vote for Anglo’s bid. 

At the peak, around 85,000 individual private investors had shares in the Yorkshire mine developer, and most of them were believed to be either first time or fairly inexperienced investors.

If the deal goes ahead, if could save more than 1,000 jobs in one of England’s most underprivileged areas, which goes hand in hand with Prime Minister Boris Johnson’s pledge to revive poorer regions of the UK.

Woodsmith is set to generate an initial 10 million tonnes per year of polyhalite, which contains four of the six key elements needed for plant growth (potassium, sulphur, magnesium and calcium).

The ore will be extracted through two 1.5km-shafts and transported to Teesside on the world’s longest underground conveyor belt, via a 37km-underground tunnel. It will then be granulated at a materials handling facility, with the majority being exported to overseas markets.