Another Uranium Buy-out C$19.12 per shareSXR Uranium to Buy Energy Metals for C$1.59 Billion (Update4)
By Stewart Bailey and Rob De laney
June 4 (Bloomberg) -- SXR Uranium One Inc., the second largest producer of the radioactive metal, agreed to buy Energy Metals Corp. for C$1.59 billion ($1.5 billion) to meet growing demand from nuclear plants in the U.S.
SXR will offer 1.15 of its shares for every one of Vancouver-based Energy Metals, the two companies said today in a statement. SXR, based in Toronto, values its offer at C$19.12 per Energy Metals share, 4.5 percent more than the June 1 closing price.
SXR wants to gain a foothold in North America, which accounts for more than a quarter of global demand for the nuclear fuel. The price of uranium has increased more than fourfold in the past year as supply growth strains to keep up with demand that's been bolstered by global efforts to limit emissions of carbon dioxide from burning fossil fuels.
``This fits with SXR's move to build a strategic position in the western U.S.,'' said Jim Taylor, an analyst at Canaccord Adams in London who rates SXR a buy. ``A strong point for U.S. consumers will be to have U.S. production'' of uranium.
Shares of SXR fell 53 cents, or 3.2 percent, to C$16.10 at 4:15 p.m. in Toronto Stock Exchange trading. They have jumped 68 percent over the past year.
Energy Metals's shares rose 15 cents, or 0.8 percent, to C$18.44, valuing the company at about C$1.53 billion. The stock price has surged threefold over the past year.
Increasing Production
The acquisition will help SXR meet its goal of producing 28 million pounds of uranium by 2013, up from 2.7 million pounds, SRX Chief Executive Officer Neal Froneman said in a conference call today.
The combined company would trail only Cameco Corp. in global uranium reserves, the companies said in the statement. SRX is already the only producer with operations in each of the top five countries ranked by uranium deposits: Kazakhstan, South Africa, Australia, the U.S. and Canada.
SXR bought UrAsia Energy Ltd. in April for $3.1 billion, giving it control of three mining and exploration projects in Kazakhstan and an exploration venture in Kyrgyzstan. SXR agreed in February to buy U.S. Energy Corp.'s uranium assets in Utah for $142 million.
``We see the need for the creation of a major U.S. uranium producer to provide fuel for U.S. power facilities,'' Froneman said. ``Growth in production appears to be earmarked for Asian countries.''
`Nuclear Renaissance'
``We are seeing a nuclear renaissance in the U.S,'' he said.
Uranium companies in the U.S. including Toronto-based Denison Mines Corp. produced 1.16 million pounds of the fuel in the country in the first quarter, 25 percent more than the year- earlier period, according to U.S. Department of Energy data.
Uranium production in the U.S. rose 57 percent last year to 4.7 million ton, according to the government data.
Energy Metals expects to complete the upgrading of a uranium processing plant in southern Texas next year, which will double the plant's output to 1 million pounds a year, according to today's statement.
Demand in the U.S. is forecast to rise with the addition of as many as 31 nuclear reactors, a 30 percent increase from the existing 104. Worldwide uranium demand will more than double by 2030, the World Nuclear Association said last month.
Uranium traded at $122 a pound today, according to Metal Bulletin. It averaged $47.42 a pound last year and traded as low as $6.95 in November 2000.
$7.8 Billion Company
SXR shareholders will own 79 percent of the combined company, which will have a market value of about $7.8 billion and cash of $678 million, the company said.
The acquisition was approved by the boards of both companies and has yet to be voted on by shareholders, according to the statement. The agreement includes a C$55 million break fee payable to SXR if Energy Metals accepts any competing bids.
SXR was advised by Bank of Montreal, Toronto-based Fasken Martineau DuMoulin LLP and Minneapolis-based Dorsey & Whitney LLP. Energy Metals was advised by GMP Securities LP and Stikeman Elliott LLP, both based in Toronto.
To contact the reporters on this story: Stewart Bailey in Johannesburg sbailey@bloomberg.net ; Rob De laney in Toronto.
Last Updated: June 4, 2007 16:25 EDT