Uranium Resources (URRE) to Acquire Neutron Energy in All-Stock Deal
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Uranium Resources, Inc. (Nasdaq: URRE) has entered into a merger agreement to acquire 100% of the equity capital of Neutron Energy, Inc. in a stock-for-stock transaction.
At the same time as the Transaction, an affiliate of Resource Capital Fund V L.P. (“RCF”) will provide $20 million that will be used to retire the majority of Neutron’s outstanding debt owed to RMB Australia Holdings Limited (“RMB”) in exchange for URI common stock. The remainder of Neutron debt owed to RMB will be converted into URI common stock, resulting in URI acquiring Neutron on a debt-free basis. A total of 37 million URI common shares will be issued for the merger, resulting in a total consideration of $38.1 million, based on URI’s closing stock price on February 24, 2012 of $1.03.
URI has also entered into an investment agreement with RCF, pursuant to which RCF will provide an additional $10 million in funding to URI through the purchase of an additional 10.3 million URI shares within 10 days of the signing of the definitive agreement. At closing of the merger, URI, at its option, can receive an additional $5 million from RCF. The $10 million provided by RCF, as well as the optional $5 million available to URI, will be used for working capital and to advance the development of projects held by URI and Neutron.
Neutron is a private uranium exploration and development company with significant assets located in the Grants Mineral Belt of New Mexico, including the Cebolleta and Juan Tafoya projects that cover 10,814 acres. The Cebolleta property contains 6.68 million tons of mineralized material at a grade of 0.176% U3O8 and 4.5 million tons of mineralized material at a grade of 0.09% U3O8, while the Juan Tafoya property contains 3.81 million tons of mineralized material at a grade of 0.149% U3O8 and 0.39 million tons of mineralized material at a grade of 0.112% U3O8. These properties are located on private lands and are planned to be mined using conventional techniques. Neutron also holds a suite of properties that neighbor certain URI properties west of Mt. Taylor, in the Ambrosia Lake region, that contain 3.2 million tons of mineralized material at a grade of 0.148% U3O8. Most of the mineralized material at the Ambrosia Lake projects is planned to be mined using conventional techniques, while there may be small isolated pockets which can be mined by ISR techniques. Neutron also has uranium assets in South Dakota and Wyoming.
The total of the New Mexico uranium holdings for the combined companies is over 206,600 acres.
Under the terms of the transaction agreements with Neutron, RMB and RCF, the 37 million shares of URI common stock to be issued will be distributed as follows: 24.6 million URI shares to RCF; 8.4 million URI shares to RMB; 3.8 million URI shares to be distributed to current shareholders of Neutron; and 0.2 million URI shares to be used to satisfy certain obligations of Neutron. Upon completion of the acquisition and RCF’s initial $10 million private placement (excluding the optional $5 million RCF investment), URI will have 143.1 million shares outstanding.
The Transaction, which has been unanimously approved by the Boards of Directors of both URI and Neutron, is subject to shareholder approval and is expected to close in the third quarter of 2012. Cormark Securities Inc. acted as financial advisor to URI in connection with the Transaction and has delivered an opinion to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Transaction is fair from a financial point of view to the shareholders of URI. Roth Capital Partners LLC acted as financial advisor to Neutron.
At the same time as the Transaction, an affiliate of Resource Capital Fund V L.P. (“RCF”) will provide $20 million that will be used to retire the majority of Neutron’s outstanding debt owed to RMB Australia Holdings Limited (“RMB”) in exchange for URI common stock. The remainder of Neutron debt owed to RMB will be converted into URI common stock, resulting in URI acquiring Neutron on a debt-free basis. A total of 37 million URI common shares will be issued for the merger, resulting in a total consideration of $38.1 million, based on URI’s closing stock price on February 24, 2012 of $1.03.
URI has also entered into an investment agreement with RCF, pursuant to which RCF will provide an additional $10 million in funding to URI through the purchase of an additional 10.3 million URI shares within 10 days of the signing of the definitive agreement. At closing of the merger, URI, at its option, can receive an additional $5 million from RCF. The $10 million provided by RCF, as well as the optional $5 million available to URI, will be used for working capital and to advance the development of projects held by URI and Neutron.
Neutron is a private uranium exploration and development company with significant assets located in the Grants Mineral Belt of New Mexico, including the Cebolleta and Juan Tafoya projects that cover 10,814 acres. The Cebolleta property contains 6.68 million tons of mineralized material at a grade of 0.176% U3O8 and 4.5 million tons of mineralized material at a grade of 0.09% U3O8, while the Juan Tafoya property contains 3.81 million tons of mineralized material at a grade of 0.149% U3O8 and 0.39 million tons of mineralized material at a grade of 0.112% U3O8. These properties are located on private lands and are planned to be mined using conventional techniques. Neutron also holds a suite of properties that neighbor certain URI properties west of Mt. Taylor, in the Ambrosia Lake region, that contain 3.2 million tons of mineralized material at a grade of 0.148% U3O8. Most of the mineralized material at the Ambrosia Lake projects is planned to be mined using conventional techniques, while there may be small isolated pockets which can be mined by ISR techniques. Neutron also has uranium assets in South Dakota and Wyoming.
The total of the New Mexico uranium holdings for the combined companies is over 206,600 acres.
Under the terms of the transaction agreements with Neutron, RMB and RCF, the 37 million shares of URI common stock to be issued will be distributed as follows: 24.6 million URI shares to RCF; 8.4 million URI shares to RMB; 3.8 million URI shares to be distributed to current shareholders of Neutron; and 0.2 million URI shares to be used to satisfy certain obligations of Neutron. Upon completion of the acquisition and RCF’s initial $10 million private placement (excluding the optional $5 million RCF investment), URI will have 143.1 million shares outstanding.
The Transaction, which has been unanimously approved by the Boards of Directors of both URI and Neutron, is subject to shareholder approval and is expected to close in the third quarter of 2012. Cormark Securities Inc. acted as financial advisor to URI in connection with the Transaction and has delivered an opinion to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Transaction is fair from a financial point of view to the shareholders of URI. Roth Capital Partners LLC acted as financial advisor to Neutron.
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