A group of Uranerz Energy shareholders are asking a Las Vegas court to block a merger that would create one of the largest uranium companies in the United States.
Uranerz Energy Corp., a Nevada commercial registered agent with a Las Vegas address; its board of directors, Energy Fuels Inc.; and EFR Nevada Corp. are defendants in the lawsuit.
Plaintiffs are claiming defendants have undervalued more than 95 million shares of Uranerz common stock by making each share worth only 0.255 shares in the merged company. Under the new agreement, Uranerz shareholders will own 55 percent of the new company, with Energy Fuels’ investors owning the remaining 45 percent.
According to the complaint, each share of Uranerz is valued at $1.37. However, in the months leading up to the merger, those shares climbed, reaching as high as $1.51 per share on Nov. 10. The merger price is also a significant discount to the company’s 52-week trading high of $1.97 per share.
Also, of the five analysts covering the stock and aggregated by Yahoo Finance, four placed a price target of a high of $2 per share with a mean of $1.63 per share and the median price being $1.55 per share.
The merger, announced Jan. 5, has been approved. The companies are filing an F-4 registration statement with the Securities and Exchange Commission, Uranerz Energy Corp. investor relations manager Derek Iwanaka said.
Michael Gayan, an attorney with Kemp Jones &Coulthard, which is representing the plaintiffs in the lawsuit, declined to comment on the pending litigation.
The complaint claims the defendants failed and refused to seek a purchase of Uranerz at the highest possible price, and instead have sought to chill potential offers and/or failed to solicit competing offers, and are allowing Uranerz’s assets to be acquired by the defendants at an unfair and inadequate price.
Plaintiffs are asking that:
■ The merger agreement be ruled unlawful and unenforceable
■ The buyout’s closing be prohibited until Uranerz implements a procedure to obtain the highest value possible for shareholders and provide all material disclosures to shareholders in which they are able to make informed decisions
■ Defendants exercise fiduciary duties to obtain highest possible value
■ The merger agreement be rescinded
■ The defendants receive a constructive trust in favor of plaintiffs upon any benefits improperly received as a result of their conduct
■ The plaintiffs receive attorneys’ fees, experts’ fees and other relief the court may deem appropriate.
Uranerz, an exploration stage company, acquires, exploits and develops uranium and mineral resources in the United States.
Energy Fuels is America’s largest conventional uranium producer, expected to provide about 20 percent of the uranium produced in the United States in 2014.
The complaint says individual defendants Dennis Higgs, Glenn Catchpole and Paul Saxton have conflicts of interest in this transaction as they will be nominated to join Energy Fuels’ board. Higgs has served as Uranerz’s executive board chairman; Catchpole has served as a board member and Uranerz’s CEO, and Saxton has served as a board member.
Paul Goranson, a Uranerz board member, president and chief operating officer, and board members Peter Bell, Arnold Dyckhas and Gerald Kitchner are also named as defendants in the complaint.
Energy Fuels’ existing management team will continue to lead the company’s executive management, with key Uranerz executive team members being retained to continue to manage and operate Energy Fuels.
The executive officers and board of directors of both Energy Fuels and Uranerz have agreed to enter support agreements to, among other things, vote their shares in favor of the transaction, according to the complaint.
The complaint claims that if the proposed acquisition is approved, the individual defendants will have breached their fiduciary duties of loyalty and due care by agreeing to sell Uranerz without first taking steps to ensure that plaintiffs would obtain adequate and fair consideration. Energy Fuels also aided and abetted the defendants’ breaches of fiduciary duty, the complaint says.
The complaint says that the individual defendants owe fiduciary duties including good faith, loyalty, fair dealing, due care and candor to Uranerz and its shareholders.
The complaint also says that individual defendants, by reason of their corporate directorships and/or executive positions, are fiduciaries to and for the company’s stockholders, which requires them to exercise their best judgment, and act prudently and in the best interests of the company’s stockholders.
The complaint alleges that the individual defendants also were conspirators and aided and abetted in all or part of the unlawful act, plans, schemes or transactions the complaint cites.
The case is still in the pretrial stages; no court date has been set.