North America Secondary Equity Issue: Cameco’s US$748m block trade

IFR Awards 2022
2 min read
Anthony Hughes

Takes the (yellow) cake
Cross-border acquisitions with concurrent stock sales have a lot of moving parts, making these some of the trickiest transactions in corporate finance.

Canadian uranium miner Cameco smoothly executed a US$748m block trade in October to partly fund its joint US$7.9bn purchase (with Brookfield Renewable Partners) of nuclear services firm Westinghouse Electric, an acquisition analysts described as the most significant transaction in the nuclear industry in more than a decade.

The Westinghouse acquisition promises to transform Cameco into a leader across the nuclear fuel cycle, adding a nuclear reactor engineering and services business to its existing uranium mining and milling operations.

Cameco surprised the market with its vertical integration via M&A and market conditions were tough so it was natural to use the common Canadian choice of a block trade.

A syndicate led by CIBC Capital Markets and Goldman Sachs (both also advised Cameco on the M&A) priced the bought offering of 34.1m shares at US$21.95, a 15% concession to last sale. The wide discount was not unusual in the turbulent market conditions that frustrated dealmaking throughout 2022. Cameco shares ended 2022 at US$22.67, a modest 3.3% gain for investors in the offering.

“[Cameco management] said they did not want to take a lot of risk and wanted to do a block trade, so we and CIBC gave them guaranteed execution. We did a slightly longer wall-cross to get to a place where we could give them a block,” said David Ludwig, Goldman Sachs’ global head of ECM.

Shares of Cameco, an infrequent issuer of equity, trade in Toronto and New York, though most of the company’s investors are in the US.

More than 100 institutional investors globally participated in the offering, including four of the world’s top five asset managers. The deal was multiple times subscribed with both new and existing investors.

“The demand was representative of the constructive expansion of interest in the nuclear space and in Cameco,” said Tim Gitzel, Cameco’s chief executive. “We were happy to secure a significant portion of the financing of our investment in Westinghouse and to further our commitment to nuclear energy supported by a base of geographically diverse and forward-thinking investors.”

The acquisition was positioned to appeal to investors with an ESG mandate.

“The transformative nature of the acquisition fit firmly within Cameco’s focus on ESG and was well received by institutional investors,” said Rob Magwood, a managing director in CIBC’s ECM business.

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