(Reuters) - Anglo American (L:AAL) on Monday agreed to buy Sirius Minerals (L:SXX) for 404.9 million pounds ($526.2 million) in cash, marking the global miner's return to fertilizer and throwing a lifeline to the struggling Sirius.
Sirius shareholders will receive 5.50 pence per share in cash, a 34.1% premium to the closing price on Jan. 7, which was the day before Anglo American said it was in talks to buy the fertilizer company. Shares of Sirius Minerals were 1.9% higher, while Anglo shares up 0.4% in the early trading.
Sirius has been battling to get bank financing to complete its North Yorkshire polyhalite mine, Britain's biggest mining project, since it began fundraising with retail investors in 2017. It embarked on a review after scrapping a plan to raise $500 million in a bond sale.
"We now face a stark choice. If the acquisition is not approved by shareholders and does not complete there is a high probability that the business could be placed into administration or liquidation within weeks thereafter," Sirius Chairman Russell Scrimshaw said.
The potential deal is also expected to save hundreds of jobs in northern England, where the lack of opportunities was an issue in the general election that returned Prime Minister Boris Johnson's government to power.
Scrimshaw said if the deal falls apart it would most likely result in shareholders losing all of their investments putting the future of the entire project and its associated benefits for the UK, at risk.
The acquisition will also see Anglo American expanding its portfolio back into fertilisers after it sold its remaining fertiliser project in Brazil in 2016 when it was recovering from a commodity market crash.