I don't think it is that bad at all, when you drill down into it.
Even a sceptic can see that there is some real value to be realised.
The ONLY downside for AEK is the effective dilution, but even this is limited when you take everything into account.
For instance:
1 - The offer is at a 29 - 59% premium to AEK's recent trading.
2 - URI are lending AEK A$2 million (CN)
3 - Merged entity will save $3 million in EPCM by using URI's team
4 - Capex savings of $8 million based on shipping URI's Rosita ISR plant to Temrezli
5 - Cronin confirmed earlier today that capex savings from Rosita are in addition (partly) to the capex reductions flagged post-PFS. This is on-top of lowest quartile capex, already.
6 - Project finance/offtake negotiating position much stronger as the merged entity will have a lower borrowing cost (i.e. for Temrezli) than AEK alone and will also achieve better off take terms, with less of a junior (counterparty) discount
7 - future equity raising (i.e. for financing Temrezli) will be at a higher valuation (thanks to North American presence)
So when comparing AEK going alone or merging with URI, I do not see it as materially dilutive. In effect AEK will have to raise less capital (within the merged entity), at a higher valuation, borrow cheaper and be more liquid. No wonder ALL of the substantial shareholders have given the deal the nod.
The merged entity will have an excellent growth profile, pounds in the ground and even on a comparative valuation, should be a huge uplift for AEK holders. The merged entity should comfortably be able to demand a valuation of US$100 million, immediately, which will mean $2 per URI share, equivalent to $0.17 per AEK (pre-acquisition).
Give it the weekend for analysts to crunch the numbers and see that Temrezli will be developed, particularly with the likely project finance on the table, and the project being valued on a Nasdaq multiple should see some serious target price updates.
On balance a robust, attractive and logical merger, where both parties should really succeed. The URI paper that AEK shareholders will receive has fallen in value by around 60% this year, even though the resource base has improved. AEK now has a clear funding development path with a mechanism to achieve full valuation and URI have near term story and project to apply themselves to until the uranium price recovers in the next 6 - 12 months, and then picking up the US projects.
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