Odey threatens to vote NO to Sirius deal: what next for shareholders?

The hedge fund run by millionaire tycoon Crispin Odey has vowed to vote against Anglo American’s takeover of Sirius Minerals.

In a dramatic intervention, Odey Asset Management branded the £405million deal a ‘mockery’.

It said the current 5.5p a share offer to buy the struggling Yorkshire potash miner was too low and did not represent ‘fair value’ for shareholders.

Odey’s calculations based on the most recent accounts suggest Sirius is actually worth £893million, which is 120 per cent more than global mining giant Anglo has offered.

The fund has built up a 1.29 per cent economic interest with voting rights in recent weeks, a stock market filing showed.

Henry Steel, the fund’s manager, said in an open letter to Sirius’ management that it would be willing to vote in favour of a bid of 7p or higher put forward by Anglo.

What does this mean for small shareholders?

The intervention forges an unlikely alliance between a Mayfair hedge fund and a growing army of angry retail investors who also believe the current offer price is too cheap. 

They face heavy losses if Anglo’s deal goes through at 5.5p. Some private shareholders have gone as far as to vote against the takeover because they are so upset by the amount of money they will lose. 

Anglo needs to secure the support of 75 per cent of shareholders at a vote on March 3.

In late 2018 Sirius estimated as much as 50 per cent of its stock was held by 85,000 retail investors. 

This makes it much harder to guarantee it will get enough support to get the deal over the line – and fears are growing that protest votes could derail it.

What if the deal doesn’t go through?

Sirius has repeatedly warned that if it does not go through the company will run out of money by April and almost certainly collapse. In the letter, Odey also outlined a theory about why Anglo has not described its 5.5p bid as a ‘final’ offer.

This, Odey said, means Anglo is expecting it to fall through or has left itself breathing room in case another bidder weighs in at the last minute. 

This would then allow it to raise the offer. Describing the offer as a ‘mockery’, the fund said: ‘Odey believes Anglo 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.

‘If such an interloper were to appear, Anglo would, rationally, wish to retain the option to counter-bid at a higher level.’

Could there really be a rival rescue? 

The fund said it believes a rival would be most likely to appear after the March 3 vote.

Institutional investor Jupiter Asset Management has previously asked the company to keep pursuing alternatives. 

But hopes of another option were dashed last week when Sirius told investors that talks with an unnamed group had ended.

Local MP and Sirius shareholder Robert Goodwill has begged shareholders to back the deal, despite it being at a price below what many think is fair.

What does Sirius say? 

Last night Sirius’ board acknowledged that the £405million deal is a poor offer, saying: ‘We recognise that the current offer does not represent the value that the board and shareholders had previously hoped for.

‘However, given the situation, we face a stark choice.’

It added: ‘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.’ 

Anglo has refused to amend its offer – saying it is a fair price, especially given that it will need to invest a further £2.5billion to complete the mine.

The Woodsmith mine’s design includes two mile-deep tunnels that reach a huge deposit of agricultural fertiliser polyhalite, and a 23-mile tunnel to Teesside that will take the material to a plant where it will be crushed before being shipped to customers.