Excerpt from FactSet Flashwire News

Acquisitions, takeover battles and bidding wars across the world are finding one thing in common: nuclear energy.

France’s government recently said it will sell a 25% stake in Areva, a nuclear fuel supplier and builder of nuclear reactors. It’s the latest of many machinations involving the company, including a thwarted bid by Siemens AG for an Areva unit and France’s Alstom SA saying it’s interested in buying the whole company.

A smaller drama played out in the U.S. where engineering services firm URS Corp. had to raise its bid for Idaho-based peer Washington Group International Inc., which specializes in services to the nuclear industry.

In addition, a host of other transactions have been done to secure everything from uranium for processing into nuclear fuel to acquiring up-and-running nuclear plants.

The deal making in this sector highlights how strategic acquirers are lining up resources ahead of what’s expected to be a long growth phase in the nuclear power industry. With limited amounts of raw materials and expertise, companies are finding it necessary to make deals now as nuclear energy becomes more important in the years ahead.

What’s driving the new interest is the combined punch of rising fossil fuel prices and worries over global warming. Those concerns are making many countries rethink nuclear energy, despite the risks and hazards.

M&A in Nuclear-related Firms

Stand-alone nuclear power and related-companies have not been a huge source of deals with only $6.8 billion in deals this year, according to FactSet Mergerstat data, up from $1.9 billion last year.

Yet when looking at the larger set of deals in the mining and utility sectors, nuclear energy has been at least one of the big themes. U.K. miner Rio Tinto Plc, which just turned down a hostile $110 billion offer from BHP Billiton Ltd., went on an investor road show earlier this year highlighting the potential growth of its uranium mining business.

To be sure, uranium accounts for only 2% of revenue at Rio and even less at BHP, despite their being among the largest uranium miners in the world. But these producers are looking forward to the expiration of their long-term production contracts under which they forward sold uranium around $20 to $30 a pound.

The spot price for uranium is currently $80 a pound and hovered around $125 a pound over the summer.

With uranium prices and production largely flat for decades, nuclear reactors have mostly been using stockpiles of fuel gleaned from recycled weapons. But as those stockpiles dwindle, there’s a new rush to secure production.

Uranium miners have been targets in $6.8 billion worth of deals so far this year. The scramble for new supply pushed Areva to buy African mining firm UraMin Inc. for $1.9 billion.

At the time of the deal, Areva executive Olivier Mallet said the acquisition was meant to get “uranium supply for our customers in a very tight market situation.”

Along with greater demand for the raw fuel comes more demand for engineering and technical expertise, an area which has seen little growth and faces a looming worker shortage as more nuclear engineers get ready to retire. Just as miners look to consolidate uranium production, a potential merger between URS and Washington Group will create a single-source provider of services to the nuclear industry.

Washington Group earlier this year signed deals with two of the largest nuclear reactor builders, GE and Mitsubishi Heavy Industries Ltd., to certify their new nuclear technology. That places the company in a leading position as more plants get built over the coming years.

Prior to the URS bid, Washington was courted by two other potential buyers, but could not agree on a price. In the wake of shareholder lawsuits complaining about the offer, URS just upped its bid from $91 to $99 a share. The offer values Washington Group at about 17 times EBITDA, a multiple in-line with other recent deals in the sector. The move to acquire Washington Group may force URS rivals such as Shaw Group Inc., Jacobs Engineering Group Inc. and privately held Bechtel to consider making acquisitions.

Nuclear power also played a role in many of the U.S. utility deals – both successful and unsuccessful – that have taken place in recent years.

Sample Transactions

TXU Corp. has applied to build two new nuclear power plants in place of the coal-fired plants that were given up to win support for its private equity buyout. Nuclear power supplies about 12% of TXU’s current generating capacity.

Florida’s FPL Group Inc., which made an unsuccessful bid last year to acquire Ohio-based Constellation Energy Group Inc., was attracted to the firm’s nuclear fleet, which accounted for more than half of Constellation’s electricity production. Likewise, New Jersey’s Public Service Enterprise Group Inc., once a target of Exelon Corp, gets more than half of its electricity from nuclear.

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