Uranium One sells 20% stake to Japanese investors

Canada-based Uranium One, the world's tenth largest uranium producer, yesterday announced an agreement to sell a 19.95% stake to a Japanese consortium made up of the Tokyo Electric Power Company, Toshiba Corporation and the Japan Bank for International Cooperation. The stake will be sold by way of a private placement of 117 million shares worth C$270 million ($217 million) to the three Japanese firms.

The deal includes a long-term offtake agreement and will see the two parties form a strategic relationship. The Japanese consortium will have the option to buy up to 20% of Uranium One's production as well as a right of first refusal to invest in any uranium mining project that Uranium One makes open to third parties. The buyers will also have the right to nominate two directors on Uranium One's board.

The consortium has been described as a long-term investor: it has agreed not to sell its stake in the company other than by a general market distribution and will not seek to increase its stake without gaining approval from Uranium One.

The shares were issued at C$2.30 each, which represents a 15% premium to the 20-day volume-weighted average price of Uranium One's stock on the Toronto Stock Exchange.

"Japanese companies' appetite for high-quality investment opportunities in strategic sectors, particularly energy, remains strong," says Motohiro Tanaka, vice-president of mergers and acquisitions at Credit Suisse, which acted as buy-side advisers. "This strategic relationship between the Japanese consortium and Uranium One should offer substantial long-term benefits in terms of energy supply security and future asset acquisition opportunities."

Uranium One is one of the world's largest uranium producers with listings on both the Toronto and Johannesburg exchanges. It has interests in two uranium mines in Kazakhstan through two separate joint ventures, including a 70% stake in a joint venture that owns the Akdala mine, which is already in operation, and the South Inkai Uranium Project, which is still at the pre-commercial production stage; and a 30% stake in the Kharasan Uranium project.

In a written statement related to the deal, Jean Nortier, president and CEO of Uranium One, highlighted that the proceeds from the private placement combined with the $185 million of cash on the company's balance sheet would position it well for its growth and development. Uranium One was advised by BMO Capital Markets.

Tokyo Electric Power is Japan's largest electric utility company and a power provider for the Tokyo Metropolitan Area. Out of its 62 gigawatt capacity, 28% comes from nuclear sources. Toshiba holds 67% of Westinghouse Electric Company, which owns the technology used in half of the world's nuclear power plants. The Japan Bank for International Cooperation is an international organisation that works towards, among other things, securing key natural resources for Japan.

The deal is subject to customary approvals which are expected to be received by March 31.

The deal is the latest in a series of acquisitions by Japanese companies, which are using depressed valuations in target markets as well as the abundance of cash on their own balance sheets to grow strategically.