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Cameco revises Hathor offer to $520M

by Scott Stuart | Published November 14, 2011 at 6:00 PM

Cameco Corp. raised its unsolicited offer for Hathor Exploration Ltd. to roughly $520 million in competition with a friendly deal between Hathor and Rio Tinto Group.

Cameco's bid of C$4.50 ($4.45) per share for Hathor is set to expire Nov. 29 and exceeds the friendly merger with Rio Tinto, of C$4.15 per share in an offer expiring Nov. 30. Cameco expects to fund its all-cash bid with cash on hand.

Cameco has not filed a revised offer document with Canadian regulators, but according to a Cameco source, other than price, the terms of the offer will remain the same and will require acceptance by two-thirds of Hathor shareholders.

The initial bid of C$3.75 was made Sept. 13 and rejected by the Hathor board as undervaluing the assets of the uranium mining company and taking advantage of the disruption to the uranium market since the March tsunami in Japan raised questions about global support for nuclear energy.

Some analysts have argued that Cameco, which has uranium mining operations in the vicinity of those of Hathor in the Athabasca Basin of northern Saskatchewan, can realize particular synergies and pay more for the company.

The Rio Tinto deal priced at C$4.15 per share for Hathor has a breakup fee of C$20 million, or C$0.16 per share, which represents about 4% of the equity value of the deal. The offer is not conditioned on financing, and Hathor insiders have committed holdings representing 4.6% of the company to the offer.

Rio Tinto, with headquarters in London and Melbourne, Australia, has a matching right if another bid is deemed superior. In that instance, Rio Tinto has five business days to make a counterbid.

Shares of Hathor traded Monday up about C$0.40 to C$4.87 at a premium of C$0.37, or 7%, to their value in the revised Cameco bid.

Some investors have doubted that Cameco can compete financially against Rio Tinto, even given its favorable geographic position relative to the target's assets in Saskatchewan.

Media reports have suggested that Cameco is seeking a partner or could even partner with Rio Tinto in acquiring and managing the Hathor operation.

Cameco declined to comment on that speculation.

According to one risk arbitrageur, bidding between Rio Tinto and Cameco could end with a price of C$5 per share for Hathor and Rio Tinto will likely bump again.

Cameco must know this and may be prepared to top a Rio Tinto counterproposal, he said.

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Cameco revises Hathor offer to $520M

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