Cameco Corp. shares fell on Wednesday after Cameco Corp. and Brookfield Renewable Partners agreed to buy Westinghouse Electric Company.
Cameco and Brookfield Renewable agreed to buy WEC from another part of Brookfield and its institutional partners for US$4.5 billion-plus debt.
Under the terms of the deal, Brookfield, which is based in Toronto, will pay US$2.3 billion and Cameco, which is based in Saskatoon, will pay the remaining US$2.2 billion for Westinghouse, which is one of the largest nuclear service providers in the world. Brookfield will own 51% of the company, while Cameco will own the other 49%. The total value of the deal, including the debt that was taken on, is $7.875 billion.
Shares of Cameco dropped 13.48% on Wednesday, ending the day at $30.82.
In a TV interview on Wednesday, Tim Gitzel, the CEO of Cameco, said in a TV interview that he knew the market would react to the news of the acquisition.
Gitzel said, “We do have to explain, and it will take some time, but I think that as we do that, people will see the benefits of making a deal with this partner on Westinghouse, and it will be good for Cameco in the long run.”
Cameco shares slide following
“The book was oversubscribed more than once. “We sold to more than 100 institutional accounts yesterday, so there is a lot of interest in the stock,” he said.
At the same time, Cameco announced plans for a bought deal to sell $650 million worth of its shares for $21.95 each, which was a big discount from Tuesday’s price in New York.
Brookfield Business Partners, which worked with institutional partners to buy the business back in 2018 for US$4.6 billion, is the company with the most shares in Westinghouse right now. Brookfield Business Partners thinks that in the four years it has owned Westinghouse, it will have made a total profit of $4.5 billion.
Westinghouse has about 9,000 employees and works with about half of the companies that make nuclear power. Most of its money comes from contracts that bring in money over and over again. About 85% of its clients are there for the long haul.
Gitzel said that the deal lets Cameco, which is one of the biggest suppliers of uranium in the world, profit from the whole nuclear supply chain instead of just the base fuel.
“We know what Westinghouse does. I’ve known them for 30 years and have probably worked with most of their top executives. ” They’re a great fit for us at Cameco. We’re in the beginning with uranium and conversion, and we make fuel for the CANDU units. Then they take over and make fuel for the Lightwater fleet, “he said.
“It’s a great match, and it’s a great match for us.”
Cameco said that it has enough cash on hand to pay for its part of the deal right now, but it will look for more cash, debt, and equity to keep its balance sheet in order before the deal closes.
The deal should go through in the second half of 2023.
Even though Cameco’s stock was down on Wednesday, Eight Capital Analyst Ralph Profit said that the deal should be good for the uranium producer in the long run.
In a report to clients, he said, “We see Cameco’s purchase of WEC as a strategic move to diversify and vertically integrate along the nuclear value chain as a complement to its high-quality, tier-one uranium asset base and fuel services segment, which combines WEC’s global nuclear fuel and plant services platform for light water reactors with CANDU fuel manufacturing for heavy water reactors.”
Over the course of the year, nuclear power has become more popular as natural gas problems caused by Russia’s invasion of Ukraine and explosions that shut down Moscow’s Nord Stream Pipeline raise worries about power outages in Europe.
Since Japan shut down its nuclear power program after the Fukushima disaster in 2011, there has been a lot of change in the nuclear industry. This has raised concerns about the need for uranium.
Back home, Ontario said in late September that it wanted to keep the Pickering nuclear power plant running for another year. This means that the unit will stay in use until 2026.
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