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Molycorp To Acquire Leading Rare Earth Processor Neo Material Technologies In $1.3 Billion Deal

Stocks in this article: MCPNEM

Molycorp, Inc. (NYSE: MCP) (“Molycorp”) and Neo Material Technologies Inc. (TSX:NEM) (“Neo Materials” or “Neo”) today announced the signing of a definitive agreement under which Molycorp will acquire Neo Materials for approximately CDN $1.3 billion. This will create one of the most technologically advanced, vertically integrated rare earth companies in the world.

“This transaction will link two unique companies – one with a world-class, high-quality resource, and the other with world-class rare earth product design and processing capabilities,” said Mark A. Smith, Molycorp’s President and Chief Executive Officer. “Neo Materials is recognized throughout the industry for its exceptionally high-quality production and processing capabilities, its patented technology platform, and its ability to consistently meet demanding customer specifications. With this combination, Molycorp will be in a unique position to enhance our time to market and provide new global customer segments with rare earth metals, oxides, and alloy powders that are unmatched today. We see significant opportunities for growth as well as powerful synergies through this transaction.”

TRANSACTION TERMS

Under the agreement, which was unanimously approved by the two companies’ boards of directors, Neo Materials shareholders will receive consideration equal to CDN$11.30 per share, comprising of CDN$8.05 per share in cash and 0.122 Molycorp shares based on Molycorp’s 20–day volume weighted average price of US$26.66. Neo Materials shareholders will have the right to elect their preferred consideration mix of cash and newly issued Molycorp common stock, with the total consideration being approximately 71.2 percent cash and approximately 28.8 percent Molycorp common stock. The CDN$11.30 per share represents a premium of approximately 42 percent to Neo Materials’ closing share price of CDN$7.97 on March 8, 2012.

A summary of the details of the transaction can be downloaded here. The transaction will be implemented through a court-approved Plan of Arrangement under Canadian law and is subject to the approval of Neo Materials shareholders, relevant regulatory approvals, and other customary closing conditions. The transaction is expected to close in the second or third quarter of 2012.

Molycorp intends to finance the majority of the cash portion of the consideration, and has obtained a committed financing facility from Morgan Stanley and Credit Suisse. Permanent financing is expected to include long-term debt, existing cash on hand of the combined company, and the proceeds from any equity issuances. Funds allocated to Project Phoenix Phase 1 and Phase 2 will not be used for this transaction.

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