Canadian uranium miner Cameco Corp. (NYSE:CCJ) (TSE:CCO) is teaming up with Brookfield Renewable Partners (NYSE:BEP) (TSE:BEP.UN) to acquire nuclear-power giant Westinghouse Electric Co., in a deal valued at nearly $7.88 billion. The deal, which is expected to close in the second half of 2023, comes amid growing interest in nuclear power due to the energy crisis in Europe and high oil and gas prices.
The U.S.-listed shares of Cameco declined 10.5% in Wednesday’s extended trading session following the news, while BEP stock was down nearly 2%.
Terms of the Westinghouse Deal
According to the terms of the agreement, Brookfield Renewable and its institutional partners will own 51% of Westinghouse, with Cameco owning the rest.
The $7.88 billion enterprise value for Westinghouse comprises an estimated $4.5 billion in equity and the remaining in debt. This implies that the equity cost for Brookfield and its institutional partners will be nearly $2.3 billion, while that for Cameco will be $2.2 billion.
Cameco has ensured that it has the liquidity and committed financing facilities to acquire a 49% stake in Westinghouse. In a separate statement, the company announced a bought deal offering to sell $650 million worth of its stock, priced at $21.95 a share. The proceeds from this offering will be used to partially fund Cameco’s Westinghouse acquisition.
It’s worth noting that Westinghouse services nearly half the nuclear power generation sector. The company filed for bankruptcy in 2017 and was bought by Brookfield Business Partners (NYSE:BBU) (TSE:BBU.UN) in 2018. As per Brookfield Business, Westinghouse’s profitability has nearly doubled under its ownership.
Brookfield Business expects to generate nearly $1.8 billion in proceeds from the sale of its 44% stake in Westinghouse, with the balance distributed among institutional partners. BBU stock was up 13.2% in Wednesday’s extended trading session.
Is Cameco Corp. a Good Investment?
Cameco scores a Strong Buy consensus rating based on six unanimous Buys. The average CCJ stock price target of $32.39 implies 25.5% upside potential from current levels. CCJ stock has advanced 18.3% year-to-date.
