Molycorp Inc. (NYSE: MCP) has just agreed to pay $1.3 billion to acquire Neo Material Technologies Inc. This will enable the mining company to gain much more exposure to China which is the largest rare earth consuming nation in the world.
This cash and stock deal will result in a rare earth mining company that has over $1 billion in annual sales based on the company’s 2011 figures. This acquisition will severely broaden Molycorp’s product portfolio and will add to the company’s earnings and cash flow in the upcoming year.
The president and chief executive, Mark Smith told the Dow Jones newswires that the deal would enable Molycorp to have global access to rare earth clients including a high-tech roster with the other major players such as Samsung and Panasonic. “It really opens up all borders to us in terms of where the customers are.” Smith was quoted to say.
Smith went on to say, “we have the ability to make the highest purity materials that tap into the highest margins.” He also added that consumers often prefer to buy their rare earths purified which are often used in high-tech electronics as well as defense systems.
The terms of the deal worked out to Molycorp paying $11.30 per share which is about a 42% premium to Neo Materials closing price last Thursday. The company will pay $8.05 per share in cash and 0.122 Molycorp shares based on Molycorp 20 day volume average price of $26.66.
The deal is not expected to close until the second or third quarter of this year and follows last year’s acquisition of an Arizona producer of rare earth alloys and metals as well as on Estonia rare earth processing company. Both of these deals helped to boost sales and that second half of 2011 for Molycorp.
