Paladin Energy shares sink on $1.25b uranium acquisition news

Investors haven't responded positively to the news.

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A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.

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Paladin Energy Ltd (ASX: PDN) shares have returned from their trading half on Tuesday and are sinking.

At the time of writing, the uranium producer's shares are down over 7% to $12.26.

Why are Paladin Energy shares sinking?

Investors have been selling the company's shares today after it announced an agreement to acquire Fission Uranium Corp. (TSX: FCU). It's possible that some investors think the company is overpaying and are hitting the sell button today.

According to the release, the two parties have entered into a definitive arrangement agreement that will see Paladin Energy acquire 100% of Fission Uranium for 0.1076 shares for each Fission share.

The offer consideration represents an implied value of C$1.30 (A$1.43) per share. This equates to a 25.8% premium to its last close price and values the Canadian uranium miner at C$1.14 billion (A$1.25 billion).

Following the unanimous recommendation by its special committee of independent directors, Fission Uranium's board of directors recommends that its shareholders vote in favour of the transaction.

Cantor Fitzgerald has provided an opinion to the special committee to the effect that the offer consideration is fair, from a financial point of view to the Fission shareholders.

Why is it acquiring Fission Uranium?

Paladin Energy's CEO, Ian Purdy, believes that the acquisition is a natural fit for its portfolio. He said:

The acquisition of Fission, along with the successful restart of our Langer Heinrich Mine, is another step in our strategy to diversify and grow into a global uranium leader across the top uranium mining jurisdictions of Canada, Namibia and Australia. Fission is a natural fit for our portfolio with the shallow high-grade PLS project located in Canada's Athabasca Basin. The addition of PLS creates a leading Canadian development hub alongside Paladin's Michelin project, with exploration upside across all Canadian properties.

Purdy notes that the combination of the two companies will create one of the world's largest pure-play uranium companies. He adds:

Both sets of shareholders are expected to benefit from the increased scale of the enlarged company, with a combined Mineral Resource representing one of the largest amongst pure-play uranium companies globally and a substantially increased international capital markets exposure. The Transaction also de-risks the development of PLS for Fission shareholders, underpinned by LHM production and Paladin's leading offtake contract book. Paladin will bring the required investment to PLS in order to advance it towards production.

The transaction is targeted to close in the September 2024 quarter. This is subject to satisfaction of all conditions under the agreement.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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