Hopu to buy 15% stake in Australia’s Paladin Energy

According to a regulatory filing, Hopu Clean Energy will subscribe to 144.9 million new shares issued by the company at A$0.42 apiece - a 11% premium to Paladin's last closing price - for a total consideration of A$61 million.

The company plans to raise an additional A$144 million through an entitlement offer to existing shareholders at A$0.26 per share. Hopu has agreed to commit A$19 million under the institutional tranche of the offer and also participate in the retail tranche.

The private equity firm will end up with a 13-15% stake in Paladin, while Wendong Zhang, senior managing director of Hopu, will join the company's board. Paladin will use the new funds to repay more than A$300 million in convertible bonds which are due in November 2015.

John Borshoff, CEO and managing director of Paladin, said the recapitalization package will allow Paladin to de-risk its balance sheet and enhance its future funding flexibility. "Hopu's investment demonstrates its confidence in the uranium industry and its understanding of Paladin's unique positioning in the uranium sector. It also increases Paladin's funding options going forward," he said.

The company said that price drops following the Fukushima nuclear disaster in Japan have abated and it expects uranium to see a long period of price strengthening. In recent months uranium spot prices have recovered from lows of $28 per pound (lb) to a recent high of $44 per lb. Meanwhile, long-term nuclear growth in China and Japan combined with supply shortfalls in the mid-term is likley to boost sentiment.

Hopu was set up in 2007 by Fang Fenglei and Richard Ong, now of RRJ Capital, and they raised a debut fund of $2.5 billion. Fang is now looking to raise a second fund of $2 billion and announced a first close of $1.1 billion earlier this year.

Recent investments include the acquisition of a minority position in an agribusiness joint venture being set up by COFCO Corporation and Noble Group, and participation in a consortium that pumped $2.5 billion into warehouse operator Global Logistic Properties. In May, it teamed up with Baikal Mining (BMC) to jointly develop a copper deposit in the eastern Russia region of Zabaikalsky, which borders China and Mongolia.

J.P. Morgan Australia is acting as financial adviser to the Paladin transaction.

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• Topics
• Greater China
• Australasia
• PIPEs
• Australia
• Commodities
• China
• Hopu Investment Management
• PIPE