The transaction will create the world’s leading, publicly traded, “pure-play” metallurgical coal producer with total coal reserves of approximately 385 million tons and a significant and growing production profile balanced between Walter Energy’s current high productivity assets in Alabama and Western Coal’s high growth assets in Canada, the United States and the United Kingdom. The combined company expects to produce in excess of 20 million tons of coal by 2012. It will also be the only producer with cost advantaged transportation access to the high growth Asian and South American seaborne metallurgical coal markets.
“This is a transformative transaction at a time when global demand for metallurgical coal is surging,” said Joe Leonard, interim CEO, Walter Energy. “Western Coal has an attractive high-quality metallurgical coal asset base and has embarked on an organic growth strategy expected to increase production more than 60% by fiscal 2013. It is a strategic fit with Walter Energy’s large scale, high-productivity mines which produce premium-quality metallurgical coal for customers in South America and Europe. Our combined production capacity and geographic footprint leaves us extremely well positioned to benefit from favorable sector dynamics driven by increased steel production in markets such as China, India and Brazil. Bottom line, this is the right transaction at the right time.”
The transaction is expected to be accretive to Walter Energy’s earnings per share in the first full year following the close of the transaction, with continued strong operating cash flows derived from existing production assets and high return on investment capital expected from development projects.
“The combined business will have substantial reserves and an experienced management team focused on safety, growth and shareholder value,” said Keith Calder, president and CEO, Western Coal. “With its size and financial strength, the combined business will have future growth opportunities that neither one of us would have on our own.”
The agreed price of C$11.50 represented a 56% premium to Western Coal’s closing share price of C$7.38 on November 17, 2010, the day before Walter Energy submitted a proposal to Western Coal. “We see tremendous opportunity for the stakeholders of both companies and we will work closely with the Canadian national and provincial authorities to give careful attention to any sensitivities, provide detail on the potential of the combined company, and to describe the broad benefits of this combination,” said Leonard.