Impact: Negative to Neutral
We are adjusting our Fission Uranium rating from TENDER to UNDER REVIEW and target from C$2.70 to UNDER REVIEW considering the ongoing uncertainty surrounding the Federal Review. Ultimately, we still expect the merger to be consummated, but given the drop in PDN share price, any buyers of FCU at this level risk a negative arb. That said, we’d expect PDN and FCU shares to pop in event of a positive Review. On the flipside, we’d expect FCU shares to also react positively should it be released from the court ordered deal. This outcome in our opinion would be better in the short term, but over the long haul, Triple R is likely better off in Paladin’s hands. A truly unique take-over of Fission Uranium by Paladin Energy (ASX:PDN, Not Rated) (read merger note), has been underway since late June 2024. The original all-scrip offer (0.1076 PND shares per FCU share) implied a C$1.30/sh offer price for FCU for a 26% premium at the time. As we said from the start, we liked the deal despite the original offer not quite achieving our target goals. FCU shareholders would maintain exposure to PLS and immediately gain exposure to U production from one of the largest mines in the world at Langer Heinrich (LHM) in Namibia. The key take-away is a major financial and technical de-risking of PLS development, something that can be achieved with the addition of experienced management, development and construction expertise, a much larger balance sheet with significant cash flow potential, and an active contract book with existing uranium customers, and acting now. The only thing that we might have questioned is why sell the project now before it was permitted?
