Just a week after declaring record results for its second quarter, Western Coal is back in the news after an approach from Walter Energy, Inc, a US producer and exporter of hard coking coal for the global steel industry, about a possible “strategic business combination.”
The combination proposal contemplates a plan of arrangement transaction whereby Western shareholders would receive a mixture of cash and Walter shares valued at $11.50 per Western share.
"From a strategic perspective, a transaction with Western Coal would be transformational for our company," said Joe Leonard, interim chief executive officer of Walter Energy. "The combined company would be the leading, publicly-traded 'pure-play' metallurgical coal producer in the world, with unique and strategic access to steel producing markets in both the Atlantic and Pacific Basins.
“The transaction would meaningfully diversify both companies' operating and development portfolios and provide new business opportunities which might not be available to either company on a standalone basis. The combined company would also be well positioned to participate in further strategic growth opportunities."
Walter's proposal, at this stage however, is nothing more than an “exclusivity agreement”, meaning that both parties agree to talk exclusively to one another for a period of 14 days ending 1 December 2010, to see if they can reach a definitive agreement.
If an agreement is reached, the combination would be subject to approval by regulatory authorities and by shareholders of Western. If not, no penalties will be incurred by either party.
At the same time, Western Coal also said its biggest shareholder, Audley European Opportunities Master Fund Ltd., has agreed to sell 54.5 million common Western shares, representing a 19.8 percent stake, to Walter for $11.50 a share, or a total consideration of approximately $630 million.
Western Coal produces high quality metallurgical coal from three mines in northeast British Columbia (Canada), high quality metallurgical coal and compliant thermal coal from four mines located in West Virginia (USA), and high quality anthracite and metallurgical coal in South Wales (UK).
