Russian company offers $1.3 billion to buy out other Uranium One shareholders

TORONTO – The Russian majority shareholder of Uranium One Inc. has made a friendly offer to buy out the minority holders and take the company private for $1.3 billion — a premium that boosted shares in the company by almost 15 per cent.

ARMZ, which already owns 51.4 per cent of the Toronto-listed uranium company’s stock, announced Monday it’s offering $2.86 cash per share for the stock that it doesn’t already own.

The offer values Uranium One in total at about $2.8 billion — far less than it would have been before Japan’s devastating 2011 earthquake and tsunami raised fears about nuclear-powered electricity plants.

Uranium One’s board unanimously recommended shareholders accept the offer from JSC Atomredmetzoloto.

“This proposal represents a significant premium to the 20-day volume weighted average price of the common shares prior to today’s announcement,” said Ken Williamson, chairman of a committee of independent Uranium One directors.

Uranium One shares (TSX:UUU) closed up 35 cents at $2.76 on the Toronto Stock Exchange on Monday as more than 59 million shares traded hands making it the most actively traded stock.

However, despite the recommendation, Dejardins analyst John Hughes thinks shareholders should reject the offer.

“We stand behind our $3.75/share valuation for the shares of Uranium One and view the C$2.86/share offer as opportunistic,” Hughes wrote in a note to clients.

He recommended shareholders push for a 10 to 20 per cent “sweetener.”

Shares in the company had been worth more than $6 per share just prior to the Japanese disaster in March 2011, but fell below $2 per share in November after it booked a $79.1-million writedown related to the value of a uranium deposit.

The decision to shutter the South Zarechnoye project located in southern Kazakhstan, announced Nov. 5, was attributed to the lower uranium prices following the Japanese disaster.

“Despite the uranium industry’s currently challenging outlook, ARMZ will continue with its strategy of developing Uranium One into the leading global uranium producer, which was the basis of our original investment in the company,” said Vadim Jivov, chairman of ARMZ’s board of directors, said Monday.

The agreement requires approval by a majority of the votes cast by shareholders other than ARMZ and its affiliates as well as approval by two-thirds of all votes cast by shareholders.

The offer by ARMZ gives the Russian company the right to match other offers and includes a $45 million break fee under certain circumstances.

The deal will also see Uranium One offer to buy nearly $260 million of its convertible unsecured subordinated debentures within 30 days of the closing of the deal.

Uranium One owns assets in Kazakhstan, the United States, Australia and is operator of, and a minority stakeholder in, the Mkuju River Project in Tanzania.