Bulking up via acquisition is a classic tactic employed by businesses. The latest such move by Uranium Energy (NYSEMKT: UEC) was announced on Monday and met with hearty investor approval gauging by the stock's more than 10% price pop on the day. That rise was far higher than that of the bellwether S&P 500 index, which increased by a far more modest 0.3%.
A $175 million deal
Wyoming-based Uranium Energy announced that it reached agreement on the purchase of a set of uranium assets from global metallurgy and mining giant Rio Tinto's American arm. The agreed price is $175 million, which is to be paid in cash.
For its money, Uranium Energy is acquiring a facility in its home state, Rio Tinto America's Sweetwater Plant. The buyer will also receive what it described as "a portfolio of uranium mining projects," comprising roughly 175 million pounds of resources.
In the press release touting the acquisition, Uranium Energy framed it as a major step in the evolution of its business, stating that the arrangement "is highly strategic and enables UEC to unlock the development potential of the company's extensive portfolio in the Great Divide Basin, creating a third U.S. hub-and-spoke production platform within UEC's pure-play uranium business."
A self-funded purchase?
Uranium Energy added that it will fund the purchase from its "available liquidity." At the end of its most recently reported quarter, though, it had less than $88 million in cash on its books and no short-term investments.
Nevertheless, this acquisition feels like just what the doctor ordered for Uranium Energy. At a stroke it puts a set of highly strategic and complementary assets in its portfolio, and pushes it closer to its goal of becoming an active and prominent miner of its namesake element.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Uranium Energy Stock Rocketed 12% Higher on Monday was originally published by The Motley Fool