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In a move that corporate officials say will strengthen financial standing, the focus on uranium enrichment and the deployment of American Centrifuge Technology, USEC announced that it entered into a stock purchase agreement to sell NAC International Inc. to Hitz Holdings U.S.A. Inc., a subsidiary of Hitachi Zosen Corporation, for $45 million in cash following the competitive sale process.
USEC acquired NAC in 2004 as NAC was adding to its diverse suite of spent fuel management technologies with the development and licensing of its Magnastor technology. In addition to specializing in technologies for the safe interim storage of spent nuclear fuel, NAC also provides transportation services for radioactive material and nuclear industry and government consulting services. Hitachi Zosen has a long-standing business relationship with NAC as a fabricator of NAC’s dry cask storage and transportation systems and is a leading supplier of such systems in Japan.
NAC was acquired by USEC for $16 million and — adjusted for inflation — has more than doubled in worth over the last nine years, provided the current asking price of $45 million stands.
“We are proud of the accomplishments of the NAC staff in recent years as they developed, licensed and started selling and delivering the industry-leading Magnastor technology for storing spent fuel. NAC expects to deliver more than 100 dry storage systems in 2013,” said John K. Welch, president and Chief Operating Officer of USEC. “In the aftermath of events at Fukushima, there is a greater focus on spent fuel storage. Hitachi Zosen has been actively involved in NAC activities through fabrication work and is well positioned to further develop market opportunities for NAC’s innovative systems.”
Welch said the sale of NAC is part of USEC’s strategic focus on its core uranium enrichment business and the deployment of the American Centrifuge technology over the next several years. At closing, Hitz Holdings U.S.A. will acquire all outstanding shares of NAC for $45 million in cash, subject to a net working capital adjustment. The sale will also benefit USEC’s near-term balance sheet improvement efforts.
Paul Jacobson, Vice President of Communications for USEC, Inc., echoed Welch’s comments on the uranium enrichment focus and expanded on why the transaction made good financial sense for USEC.
“The money will help USEC’s efforts, which are tied to moving the centrifuge forward in this way. The RD&D (research, development and demonstration) program currently underway is to prove the technical robustness of the program and performance statistics. At the same time, we have been saying for many months that we are also working on strengthening our balance sheet,” Jacobson said. “One of the ways, of course, to strengthen your balance sheet is to have more cash. This will certainly help from that standpoint as we look toward really making sure we have both a firm technical and financial foundations when we go back, as part of the broader centrifuge team, to update the loan guarantee application some time later this year.”
The improvement to USEC’s books certainly cannot hurt the ongoing effort to secure the $2 billion loan guarantee from the U.S. Department of Energy of which Jacobson was speaking.
“That’s part of the effort. We want to get the technology proven once and for all in the RD&D program and that is going very well and as we have been saying in our quarterly conference calls for some time now, we are also looking at strengthening that balance sheet. Which is sort of the other side of the coin in terms of moving the project forward,” Jacobson said.
Jacobson described the direct impact of the transaction to the operation in Piketon as negligible.
“It really, for the Portsmouth area and Piketon, there really isn’t any direct impact and this will have minimal impact on USEC itself,” he said. “The main issue or the main reason for this is USEC’s continued effort to really focus on its core business, which is uranium enrichment and the deployment of the American Centrifuge technology over the next several years.”
On the other side of the transaction, Hitachi Zosen’s acquisition of NAC opens a new and demanding market to the nuclear storage/transport specialist in Japan.
In a written release, Hitachi Zosen stated, “through the acquisition of NAC, Hitachi Zosen will be able to offer a ‘one stop’ solution from engineering/consulting to manufacturing/transportation for spent nuclear fuel storage and transportation and to develop this business globally.”
Jacobson described the move as a timely for Hitachi Zosen, as governments and policy makers around the world have a lot of interest in spent fuel technology.
“I think it certainly it certainly was a solid investment and a solid return for USEC and NAC. They (NAC) are very good at what they do and they really are the industry leader in that area. They will be able to have access to some new markets,” Jacobson said. “It makes a great deal of sense especially in Japan where there is a significant interest in the proper storage and transport of used nuclear fuel.”
Hitachi Zosen, a Japanese corporation, has guaranteed the performance and payment obligations of Hitz Holdings U.S.A. under the stock purchase agreement. USEC will agree to certain non-competition and non-solicitation covenants that restrict USEC from engaging in competition with NAC for a period of three years following the closing.
“We are very excited about becoming part of Hitachi Zosen,” NAC President Kent Cole said. “We have a long-standing relationship with Hitachi Zosen and have a deep respect for its excellent operations. We view this acquisition as a strategic move that has great promise for our customers and our employees.
The transaction closing is subject to customary conditions, notices and approvals including lender approval under USEC.
Despite the improved financial standing, USEC says the main emphasis of Wednesday’s announced transaction is less on the balance sheet and more on underscoring the importance and dedication to the main business of the company.
“We have invested more than $2 Billion in it (uranium enrichment) and that’s where we want to maintain our focus,” Jacobson said. “The research and development program is going well and we are working at getting 120 centrifuges built and we are hitting all the marks on time and on budget, and so hitting all those short-term goals in 2013 will lead us to the long-term success of the program. At the same time it is a good transaction for our investors with a sales price of $45 million.”
Bob Strickley can be reached at 353-3101, ext. 296, or firstname.lastname@example.org.