Mr. Glen Williams reports
SPROTT ASSET MANAGEMENT ENTERS INTO AGREEMENT WITH URANIUM PARTICIPATION CORPORATION TO FORM THE SPROTT PHYSICAL URANIUM TRUST
Sprott Asset Management LP, a wholly owned subsidiary of Sprott Inc., has entered into a definitive agreement with Uranium Participation Corp. pursuant to which UPC shareholders will become unitholders of the Sprott Physical Uranium Trust, a newly formed entity managed by Sprott Asset Management.
UPC is the world's largest publicly traded investment vehicle, providing investors with an opportunity to gain exposure to the price of uranium, outside of a traditional mining company, through holdings of physical uranium in the form of uranium oxide in concentrates (U3O8) and uranium hexafluoride (UF6). At the end of March, 2021, UPC reported holding 16,269,658 pounds U3O8 and 300,000 KgU as UF6, with a then market value of approximately $665-million.
"Sprott Asset Management currently manages four physical commodity funds with approximately $12-billion (U.S.) in assets under management," said John Ciampaglia, chief executive officer of Sprott Asset Management. "We believe our global brand, fund marketing experience and client base of more than 200,000 investors will improve trading liquidity and grow UPC's asset base during what we believe is the start of a bull market for physical uranium."
"All current Sprott Physical Trusts are listed on both the Toronto Stock Exchange and the NYSE Arca and, upon completion of this transaction, one of our primary objectives is to seek a dual listing for the trust, in order to increase its profile with U.S. and international investors. We are also pleased to announce that WMC Energy will act as technical adviser to assist us in the management of the trust," added Mr. Ciampaglia.
"This transaction is important to Sprott as it demonstrates the significant value that we can bring to our shareholders and clients in managing mineral commodities in areas adjacent to our traditional precious metal expertise," added Peter Grosskopf, chief executive officer of Sprott.
Pursuant to a plan of arrangement under the Business Corporations Act (Ontario), each UPC common share will be exchanged for one unit of the newly formed trust or, at the election of UPC shareholders that are Canadian residents for tax purposes, one exchangeable share of a Canadian subsidiary of the trust, which will be exchangeable into one unit of the trust and UPC will become a wholly owned subsidiary of the trust. The trust will be managed by Sprott Asset Management and WMC Energy, a global commodities merchant with significant experience in the nuclear fuel cycle, will advise and assist with all matters involving physical uranium.
The transaction is expected to close in the late second or early third quarter of 2021, subject to the satisfaction of customary conditions, including receipt of regulatory, securities commission and stock exchange approvals, Ontario court approval, and approval by the common shareholders of UPC.
The definitive agreement provides for, among other things, customary representations, warranties and covenants, including customary non-solicitation covenants and a fiduciary out that allows the UPC board to terminate the definitive agreement to accept a superior proposal in customary circumstances, subject to a right to match in favour of Sprott Asset Management and payment by UPC of a termination fee of up to $3.0-million to Sprott Asset Management. Sprott Asset Management has agreed to reimburse UPC up to $1.0-million, other than in certain limited circumstances, for out-of-pocket expenses incurred by UPC in connection with the transaction, to finance the payment of the termination fee payable to UPC's current manager under its existing management services agreement and to contribute $6.7-million (Canadian) to UPC at closing, representing approximately 1 per cent of UPC's most recently calculated net asset value. The foregoing summary is qualified in its entirety by the provisions of the definitive agreement, a copy of which will be filed by UPC under its profile on SEDAR.
Stikeman Elliott LLP and Skadden, Arps, Slate, Meagher & Flom LLP are serving as legal counsel to Sprott Asset Management.
About Sprott Inc.
Sprott is a global leader in precious metal and real asset investments. With offices in Toronto, New York and London, Sprott is dedicated to providing investors with specialized investment strategies that include exchange-listed products, managed equities, lending and brokerage. Sprott's common shares are listed on the New York Stock Exchange under the symbol SII and Toronto Stock Exchange under the symbol SII.
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