Walter Energy Inc. has announced that it has submitted a proposal to Western Coal Corp. to acquire the outstanding common shares of Western Coal for C$ 11.50/share in cash and company stock.
In connection with the proposal, Walter Energy has entered into an exclusivity agreement with Western Coal under which they have agreed to work exclusively with each other for a period of up to 14 days toward the negotiation of definitive agreements to give effect to the proposal. The transaction would be effected by way of a statutory plan of arrangement pursuant to the Business Corporations Act (British Columbia).
Separately, Walter Energy has agreed to purchase from affiliates of Audley Capital common shares representing 19.8% of the outstanding common shares of Western Coal for C$ 11.50/share, or a total consideration of approximately C$ 630 million (US$ 615 million), subject to adjustment in certain circumstances. The total enterprise value of the proposal for Western Coal, including the purchase from Audley Capital, is C$ 3.3 billion (US$ 3.2 billion), net of cash on the balance sheet.
“From a strategic perspective, a transaction with Western Coal would be transformational for our company,” said Joe Leonard, interim CEO 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.”
On a pro forma basis, the combined company would have total coal reserves of approximately 385 million t, based on the most recent disclosures by Walter Energy and Western Coal. Walter Energy currently produces approximately 7 million t of premium met coal, with organic expansion plans expected to increase that number to up to 9.5 million t in 2012. Western Coal expects to produce a total of 6.7 million t of coal in the fiscal year ended March 2011 and has growth plans to achieve 11 million t of total coal production during fiscal year ended March 2013. The increase in production and reserves would position the new entity to capitalise on the current and anticipated strength in the global met coal markets.
Under the purchase agreement with Audley, the company will purchase approximately 54.5 million common shares of Western Coal owned by Audley, representing 19.8% of the total outstanding common shares of Western Coal, in two installments. Upon the satisfaction of closing conditions, Walter Energy will acquire approximately 25.3 million common shares for cash and will acquire the remainder of the stake in cash or company stock immediately upon the acquisition of Western Coal by Walter Energy or, in any event, no later than 30 April 2011. The acquisition of Audley's shares is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and compliance with any other applicable competition laws.
Read the article online at: https://www.worldcoal.com/coal/18112010/walter_energy_enters_business_combination_negotiations_with_western_coal/