Shares of Cameco Corp. dropped Wednesday following its agreement with Brookfield Renewable Partners to buy Westinghouse Electric Company (WEC).

Cameco and Brookfield Renewable agreed to buy WEC for US$4.5 billion, plus debt, from another unit of Brookfield and its institutional partners.

Under the terms of the deal, Toronto-based Brookfield will pay US$2.3 billion and Saskatoon-based Cameco will contribute the remaining US$2.2 billion for Westinghouse, one of the world’s largest providers of nuclear services. Brookfield will own 51 per cent of the business, with Cameco owning the remaining 49 per cent. Including assumed debt, the transaction comes in at an enterprise value of US$7.875 billion.

Shares of Cameco fell 13.48 per cent, to $30.82, to finish Wednesday’s trading day.

Cameco chief executive officer Tim Gitzel said in a television interview Wednesday that he knew there would be market reaction to the acquisition news.

“We do have to explain [and] it's going to take us a little while, but I think as we do that, people will recognize like us the benefits of doing a deal with this partner on Westinghouse and it’s going to be good for Cameco long-term,” Gitzel said.

“The book was multiple times oversubscribed. Yesterday, we sold to over 100 different institutional accounts, so lots of interest for the stock,” he said.

Concurrently, Cameco announced plans for a bought deal to sell US$650 million worth of its shares at US$21.95 apiece — a steep discount to its trading price in New York Tuesday.

The current dominant shareholder of Westinghouse is another arm of Brookfield –  Brookfield Business Partners – which partnered with institutional partners to buy the business back in 2018 for US$4.6 billion. Brookfield Business Partners expects to book US$4.5 billion in total profit from its four years of owning Westinghouse.

Westinghouse employs about 9,000 people, and services approximately half of the nuclear power generation sector. The bulk of its revenue comes from recurring-revenue contracts, with about 85 per cent of its clients being signed in for the long term.

Gitzel said the deal allows Cameco – one of the world’s largest suppliers of uranium – to capitalize on the full nuclear supply chain, rather than being a source of the base fuel.

“We know Westinghouse – I’ve know them for 30 years – probably worked with most of their senior executives, we know what they do. They’re a great fit for us at Cameco, we’re in the front end with uranium and conversion, and we make fuel for the CANDU units, and then they take over and make fuel for the lightwater fleet,” he said.

“It’s a real good match and a real good fit for us.”

Cameco said it currently has enough liquidity to finance its part of the deal, though it will be pursuing additional flexibility in the form of cash, debt and equity in order to keep its balance sheet in order prior to closing.

The transaction is expected to close in the back half of 2023.

While shares of Cameco were under pressure Wednesday, Eight Capital Analyst Ralph Profiti said that longer term, the deal should be a boon for the uranium producer.

“We see Cameco’s acquisition of WEC as a strategic move to diversify and vertically integrate along the nuclear value chain as a complement to its high-quality, tier-one uranium asset base and fuel services segment, which combines CANDU fuel manufacturing for heavy water reactors with WEC’s global nuclear fuel and plant services platform for light water reactors,” he stated in a report to clients.

Nuclear power has been gaining greater interest over the course of the year, as natural gas disruptions stemming from the Russian invasion of Ukraine and explosions disrupting Moscow’s Nord Stream Pipeline threaten European energy security raise concerns of power outages.

The nuclear industry has by and large been in flux since Japan essentially idled its nuclear power program in the wake of the 2011 Fukushima disaster, creating concerns over demand for uranium.

Back here at home, Ontario announced plans to keep the Pickering nuclear power generation plant active for an additional year in late September, outlining plans to keep the unit in operation until 2026.

-- With files from Daniel Johnson