Uranium One's board recommended yesterday that the company be taken private by the Russian firm JSC Atomredmetzoloto (ARMZ) for C$1.3 billion, a price that analysts believe is too low.
The offer implies an equity value of C$2.8 billion for Uranium One, says the company in a news release. If the deal goes ahead, shareholders will get $2.86 per share.
"The cash consideration represents a 32% premium to the 20-day volume weighted average price of the Common Shares on the Toronto Stock Exchange for the period ending January 11, 2013," says the company in a statement.
The Russian firm already own 51.4% of Uranium One common shares.
Uranium One's chief executive admitted to the Financial Post that the company is not selling at an opportune time, which is near the bottom of the market for uranium.
“The fact that [the offer] was based on a much higher uranium price than where we are today was a driving force in recommending it for shareholders,” Sattler told the Financial Post.
He said the sale price for the company was built in at US$66 a pound, rather than the current US$42 a pound.
David Sadowski, an analyst for Raymond James, criticized the deal in a note (Northern Miner, sub required) and says shareholders should vote against the deal since the outlook for uranium is bullish.
"Demand for nuclear power has remained resilient with ramping electricity requirements around the world, volatility in fossil fuel prices, energy supply security concerns and a global preference for carbon-neutral sources," wrote Sadwoski in an August interview with the Gold Report.
"We forecast prices to average above $60/lb in 2013 and north of $70/lb in 2014 and 2015 before settling to $70/lb in the long-term."
RBC Dominion Securities analysts Adam Schatzker also chimed in.
"The spot price is currently very close to seven-year lows and we think there is significant upside potential for Uranium One’s shares in the next 18 to 24 months," wrote Schatzker in a report.
Disclosure: Michael McCrae has holdings in Global X Uranium Funds and Cameco.