Sirius Minerals (LON:SXX) have been in talks with Anglo American over a potential takeover deal, and the firm has seen a busy few months of trading with shares crashing and surging.
Shares in Sirius Minerals trade at 4p (-1.73%). 18/2/20 12:42BST.
The last year has been busy for Sirius Minerals, and investors have tipped them to be one of the hottest prospects on the market.
The firm however, have seen their shares become very volatile. Certainly the world volatile may not cut the changes that Sirius have seen over the last year.
The firm has seen a 52 week change in share price of -74.72%, a dramatic fall which has included ebbs and flows from takeover talks with Anglo American (LON:AAL), a new financing plan and changes to their operations in Yorkshire.
52 week highs have been recorded at 8,389p whilst the 52 week low was seen at 2.1p. Such a change between the two figures reflects the shifting nature of the share price and the current changes that the firm is going through.
Notably, the 50 day moving average is 5.098p which is slightly short of the 200 day moving average of 5.431p.
Many are wondering, what is next for Sirius Minerals?
Anglo American – Sirius deal
At the start of 2020, it was reported that Anglo American were in advanced talks to acquire Sirius Minerals.
This deal was supposedly given the green light, as Anglo said that they will offer 5.5p per shares for Sirius, which shows a 34% rise to the closing price of Sirius on Friday 17th January of 4.1p.
Sirius Minerals itself said its directors consider the acquisition to be “fair and reasonable”, and have recommended that shareholders vote in approval of the offer.
The offer is conditional on whether 75% of Sirius shareholders decide to vote in favor for the merger deal, which will be done at an upcoming court meeting.
Anglo American have remained confident about the acquisition and have said that they expect this to be formally completed by the end of March.
The share price offer values Sirius at £404.9 million, and is a deal which Anglo American will be thoroughly excited with.
The chairman of Sirius did acknowledge that shareholders may not have been happy with the proposed merger deal, and at the time he commented saying:
“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.”
The future for Sirius Minerals
It is important to remember that the deal is yet to get clearance, and the court procedures are still set to be debated between the parties involved.
Shareholders do not seem pleased with the deal that has been struck between Sirius and Anglo American.
However, some optimism has to remain within the firm. Anglo American are a mining titan, and certainly will be able to heavily invest into the operations and procedures of Sirius Minerals.
Sirius Minerals had to find a finance option from somewhere – the firm did run into problems when financing their Yorkshire potash project and it seems that the deal was a case of ‘need’ rather than ‘want’.
The firm did announce a new strategy last November, which involved less upfront capital with the hope that the Sirius could move onto the second phase in the near future.
Sirius looked to have the right procedures and plans in order to commercialize their Potash project. Most small mining companies do not make as much progress before they are taken out a large discount to the supposed value of the project.
The deal with Anglo American is subject to clearance, and shareholders will be keen to voice their opinion.
However, it is important to remember that at a time where Sirius Minerals needed a bigger partner to help finance their ongoing operations, Anglo American did answer that call.
If the deal goes through, there will be an initial feeling of pessimism. However – with the backing of Anglo American, there is much hope for Sirius Minerals and shareholders should fully evaluate both the costs and benefits before making their opinions heard when the deal is being considered by all stakeholders involved.
On January 14, Berenberg reiterated a stance of ‘Hold’ for Sirius Minerals. This followed two ‘Buy” stances on the 11th and 12th November issued by Liberum Capital.