January 14, 2013 / 6:45 AM / 5 years ago

UPDATE 3-Russia's ARMZ to take Uranium One private for $1.3 bln

* Deal values Uranium One at $2.8 bln, C$2.86/share

* Shares close up 14.52 pct to C$2.76 on TSX

By Melissa Akin and Julie Gordon

MOSCOW/TORONTO, Jan 14 (Reuters) - Russia’s state uranium company has agreed to pay C$1.3 billion (US$1.32 billion) to take Canada’s Uranium One Inc private, as the successor to the Soviet Union’s nuclear industry seeks to strengthen its grip on supplies.

Atomredmetzoloto and its Effective Energy N.V. affiliate - together known as ARMZ - said on Monday they would buy the shares of Uranium One they do not already own in a deal valuing Canada’s No.2 uranium producer at C$2.74 billion ($2.8 billion).

The deal sent the stock up more than 14 percent on Monday to close at C$2.76 on the Toronto Stock Exchange. That was below the C$2.86 per share offer price, suggesting some uncertainty over the outcome.

ARMZ currently owns 51.4 percent of Uranium One’s common shares. If successful, the full takeover would help ARMZ consolidate control over uranium assets in the former Soviet Union and also strengthen access to reserves in Australia and the United States.

It will also leave just two major publicly listed, pure-play uranium producers - Canada’s Cameco Corp and France’s Areva SA.

Demand for uranium, used mainly as fuel for nuclear reactors, has come under pressure since the March 2011 earthquake and tsunami in Japan triggered a meltdown at the Fukushima-Daiichi atomic power plant.

The disaster led countries such as Germany and Japan to back away from nuclear power. China, India and Russia are all pushing ahead with new reactors, but in a more measured fashion.

The price of uranium price has fallen from about $68 a pound before Fukushima to around $43, while shares of Uranium One have more than halved in value.

Announcing plans to delist the Canadian company, ARMZ Chairman Vadim Zhivov said the stock market had offered “considerably broader opportunities for development” when the Russian company acquired its controlling stake in 2009.

“Now, the situation has changed and the private format is more effective for meeting the challenges in front of us,” Zhivov said in a Russian-language statement.

Uranium One’s operations are focused in Kazakhstan, where ARMZ is also building up its asset base.

Kazakhstan is the world’s top uranium producer, with more than double the output of No.2 producer Canada in 2011, data from the World Nuclear Association showed. Its output quintupled between 2004 and 2011.

Toronto-based Uranium One is also the operator of the Mkuju River project in Tanzania.


ARMZ is the mining arm of Russia’s nuclear regulator, Rosatom, which also builds nuclear reactors both at home and abroad.

Russia currently has 33 operating reactors and 10 reactors under construction, according to the World Nuclear Association. There are 435 reactors operating around the world, with 65 under construction and another 167 in the planning stages.

The move to take Uranium One private has sparked some concern that uranium supply available to other consumers would dry up, said Rob Chang, an analyst with Cantor Fitzgerald in Toronto.

“Technically the supply is still there,” said Chang. “But now that ARMZ has full control, I’m not sure what’s going to stop them from sending all that material into Russia.”

That could prove worrisome for utilities in China, Japan and the United States that were expecting at least part of their uranium supplies to come from Uranium One.

It could also give Rosatom an edge in selling new reactors, as the state-owned company can ensure future supply as part of its sales deal, said Chang.

The transaction, already approved by Uranium One’s board, is expected to be completed in the second quarter of 2013, the company said in a statement.

The deal includes a non-solicitation covenant, under which Uranium One will not seek other bids, as well as a right for ARMZ to match any rival offers. It also requires Uranium One to pay a termination fee equal to C$45 million under certain circumstances.

Canaccord Genuity Corp was the financial advisor to the independent committee that was set up by the Uranium One board for this deal, while ARMZ was advised by BMO Capital Markets.

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