The market thinks that the takeover battle for uranium company Hathor Exploration Ltd. is far from over. The stock is trading 8% above the friendly bid from Rio Tinto Ltd., as investors expect Cameco Corp. to return with a second hostile offer.

But will it? Dundee Capital Markets analyst David Talbot thinks so, and he anticipates that the Cameco offer is “just around the corner.”

“The market agrees with Dundee that another bid would possibly be required to entice investors to accept a takeover,” he wrote.

Mr. Talbot cites three reasons why he believes Cameco cannot back down now. One is that Hathor’s Roughrider deposit is “too good an asset” to pass up, especially since it is in Cameco’s backyard in Saskatchewan (where the company has major synergies). Second is that Cameco “can’t afford” to let Rio Tinto into the Athabasca Basin, as it would become a serious competitor for new projects and personnel. Third is the fact that this is the first big move for new Cameco chief executive Tim Gitzel, and Mr. Talbot does not believe he can back down now “without a need to save face.”

“With the implications of a major mining company such as Rio Tinto threatening to enter the basin, despite what Cameco has said publicly about already bidding for ‘full and fair value,’ perhaps economics of the project [go] out the window and Cameco pays more than it would prefer for Hathor,” Mr. Talbot wrote.

He has a price target on Hathor of $5.20 a share, a whopping 25% premium to Rio Tinto’s offer price of $4.15 a share

http://business.financialpost.com/2011/10/26/new-hathor-bid-could-be-imminent/