Ideas Elsewhere: Latitude Uranium (LUR:CN) / 92 Energy (92E:AX)

Three-way merger arbitrage

Alpha Vulture recently brought to light an interesting three-way merger arbitrage opportunity in the uranium sector. Canada-based uranium exploration company Atha Energy (SASK:CN) is acquiring its peers Latitude Uranium (LUR:CN) and 92 Energy (92E:AX) through all-stock transactions. Under the terms of the deals, LUR and 92E shareholders will receive 0.2769 SASK and 0.5834 SASK per share, respectively, resulting in spreads of 22% and 47% at current prices. These spreads seem excessive for transactions that should no hurdles in closing and are expected to be completed relatively soon – Q1’24 (LUR) and Q2’24 (92E). However, what likely explains these spreads is very risky and limited hedging availability and also that the target companies are obscure nano-caps making them a no-go/non-actionable to a substantial portion of market participants (e.g. LUR is trading on Canadian Securities Exchange, which is not easily accessible outside Canada). Currently, only 20k SASK shares are available for borrowing on the US OTC listing on IB, at a 27% annual fee. While there’s the option of playing these trades without hedging, this would expose investors to the risk of significant price swings and/or potential selling pressure upon the completion of the transactions.

Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I might not actively follow the developments of these ideas, so there might be limited updates or follow-ups in the comments section.

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1 thought on “Ideas Elsewhere: Latitude Uranium (LUR:CN) / 92 Energy (92E:AX)”

  1. Both deals closed successfully within 3 months.

    March 7, 2024 – ATHA Energy Corp. (TSXV: SASK) (FRA: X5U) (OTCQB: SASKF) (“ATHA”) and Latitude Uranium Inc. (CSE: LUR) (OTCQB: LURAF) (FRA: EI1) (“Latitude Uranium”) are pleased to announce the successful completion of the previously announced arrangement (the “Arrangement” or the “Merger”) whereby ATHA has acquired 100% of the issued and outstanding common shares of Latitude Uranium (the “LUR Shares”) and Latitude Uranium has become a wholly owned subsidiary of ATHA.

    April 10, 2024 (GLOBE NEWSWIRE) — ATHA Energy Corp. (TSXV: SASK) (FRA: X5U) (OTCQB: SASKF) (“ATHA”) is pleased to announce the successful completion of the previously announced Australian scheme (the “Scheme”) involving ATHA and 92 Energy Limited (ASX: 92E) (“92 Energy”) pursuant to which ATHA has acquired all of the fully paid ordinary shares in 92 Energy (the “92 Energy Shares”).

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