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Proposed Mega Uranium/Rockgate Capital merger terminated

by Greg Klein | September 24, 2013

Rockgate Capital TSX:RGT called off its proposed merger with Mega Uranium TSX:MGA on September 24 after the latter declined to match a “superior proposal” from Denison Mines TSX:DML. But Rockgate expressed strong reservations about Denison’s terms, saying it will solicit other offers while conducting due diligence.

A Rockgate shareholders’ vote scheduled for September 25 has been cancelled. The two companies announced their proposal June 6 but it wasn’t until September 17 that Denison burst in with its rival offer, touting the all-share deal as a 38% premium over Mega’s proposal, based on September 16 closing prices.

We continue to remain optimistic about the long-term strength of
the uranium market
and view this period of
industry weakness opportunistically for the purposes of accumulating uranium assets… —Richard Patricio, executive VP of corporate affairs for Mega Uranium

Although Rockgate directors described Denison’s offer as a “superior proposal,” they made no recommendations to shareholders. Instead they noted the Denison deal would be a “change of control transaction” as opposed to a “merger of equals.” They also described the offer as “highly conditional. There are conditions in the Denison offer which are not subject to a materiality threshold or other objective criteria, but provide Denison with the sole discretion as to whether to proceed with the Denison offer.”

Rockgate’s board said it needed more time for due diligence and would also solicit competing offers.

Saying its work continues “unimpeded by these corporate actions,” Rockgate stated its Falea uranium-silver-copper project in Mali remains on schedule with metallurgical flowsheet test work and a pre-feasibility study slated for mid-February completion.

Rockgate has paid Mega a $1-million break fee.

As for Mega, “The changing fundamentals of the deal no longer represented a comfortable value proposition,” said the company’s executive VP of corporate affairs Richard Patricio. In a statement accompanying Mega’s announcement he added, “We have identified several other opportunities which fit within our model of owning quality uranium projects through direct property ownership or strategic equity investments. We continue to remain optimistic about the long-term strength of the uranium market and view this period of industry weakness opportunistically for the purposes of accumulating uranium assets, while continuing to aggressively control our operating costs.”

Mega shareholders will vote September 30 on a proposed 1:10 reverse split and name change to Uranium Capital Corp.

Rockgate shares opened September 24 at their previous close of $0.205, reached a high of $0.21 and a low of $0.195 before closing back on $0.205. With 116.9 million shares outstanding, the company had a market cap of $23.96 million.

Mega stock opened September 24 on its previous close of $0.085, then slipped to a close of $0.08. Mega had 267.18 million shares outstanding for a $21.37-million market cap.

Denison opened the day on $1.13, a penny below its previous close, dropped to $1.10, then closed on $1.11. The company’s 449.93 million outstanding shares constitute a market cap of $499.42 million.

Read more about the proposals and other uranium merger-and-acquisition activity.

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