A. NUKEM Energy GmbH (NUKEM)
On January 9, 2013, Cameco completed the acquisition of NUKEM from Advent International (Advent) and other shareholders, through the purchase of all the outstanding shares for cash consideration of €107,149,000 ($140,494,000 (US)), plus additional consideration of €6,075,000 ($7,808,000 (US)). This additional consideration represents a share of NUKEM’s 2012 earnings under the terms of the agreement. Based on an amending agreement entered into during the year, no further earn-out payments will be made.
While Cameco received the economic benefit of owning NUKEM as of January 1, 2012, the results of NUKEM have been consolidated with the results of Cameco commencing on January 9, 2013. NUKEM is one of the world’s leading traders and brokers of nuclear fuel products and services. The acquisition complements Cameco’s business by strengthening our position in nuclear fuel markets and improving our access to unconventional and secondary sources of supply.
In accordance with the acquisition method of accounting, the purchase price was allocated to the underlying assets and liabilities assumed based on their fair values at the date of acquisition. Fair values were determined based on discounted cash flows and quoted market prices. The values assigned to the net assets acquired were as follows:
Net assets acquired (USD) Cash and cash equivalents $12,974 Accounts receivable 43,529 Other working capital 5,172 Inventories 165,280 Intangible assets 87,535 Accounts payable and accrued liabilities (68,464) Long-term debt (116,922) Provisions (15,514) Deferred tax liabilities (53,665) Goodwill 88,377 Total $148,302 Cash $140,494 Additional consideration 7,808 Total $148,302
The fair value of the acquired accounts receivable approximates its carrying value due to the short-term nature of the balance. None of the accounts receivable were impaired and the amounts were fully collected.
Intangible assets include the fair value of the purchase and sales contracts that NUKEM was a party to as at January 9, 2013.
The goodwill arising on acquisition is attributable to the difference between the accounting fair value and the tax basis of the net assets acquired, and is not deductible for income tax purposes. Goodwill reflects the value assigned to the expected future earnings capabilities of the organization. This is the earnings potential that we anticipate will be realized through new business arrangements.
Since the effective date of the transaction was January 9, 2013, the consolidated revenue and net earnings for the year is not materially different than what would be reported if the business combination had occurred at the beginning of the year.
Acquisition costs of $3,800,000 have been expensed and included in administration expense in the 2012 consolidated statements of earnings. In addition, an advisory fee of $2,980,000 has been included in administration expense in the consolidated statement of earnings for the year ended December 31, 2013.
As at December 31, 2013, NUKEM had the following commitments (in USD) to purchase uranium and fuel services products:
2014 2015 2016 2017 2018 Thereafter Total $177,186 175,602 245,770 38,420 38,420 153,681 $829,079
On December 18, 2012, a wholly owned Cameco subsidiary acquired a 100% interest in the Yeelirrie uranium project in Western Australia from BHP Billiton for a total cost of $453,900,000 (US). Included in the purchase price is $1,500,000 (US) in transaction costs and a $22,000,000 (US) stamp duty payable to the government of Western Australia. Yeelirrie is one of Australia’s largest undeveloped uranium deposits and is located about 650 kilometres northeast of Perth and about 750 kilometres south of Cameco’s Kintyre exploration project. The acquisition was financed by existing cash balances and substantially all of the purchase price was assigned to exploration and evaluation assets included in property, plant and equipment.
On June 11, 2012, Cameco acquired a 27.94% interest in the Millennium project from AREVA Resources Canada Inc. (AREVA) for $150,840,000, increasing its ownership to 69.9%. The remaining 30.1% is owned by JCU (Canada) Exploration Co. The Millennium project is a proposed uranium mine located in the Athabasca Basin of northern Saskatchewan. The terms of the purchase agreement provide AREVA with a 4% royalty on revenue from 27.94% of any production that exceeds 63,000,000 pounds U3O8 from this project. The acquisition was financed by existing cash balances and the purchase price was assigned to exploration and evaluation assets included in property, plant and equipment.