Vancouver-based coal miner Western Coal Corp. (TSX:WTN; AIM:WTN) is being acquired by Tampa’s Walter Energy (NYSE:WLT) for $3.3 billion.
The resulting company will be among the world’s largest producers of metallurgical coal, which is primarily used in the production of steel.
Walter’s total coal reserves will be approximately 385 million tonnes. The combined company expects to produce more than 20 million tonnes of coal by 2012.
The companies noted in a release the deal gives Walter transport access to Asian markets.
To date, Walter’s coal, which is buried in the Appalachians, largely ends up in South America and Europe.
"This is a transformative transaction at a time when global demand for metallurgical coal is surging," said Joe Leonard, Walter’s interim CEO.
Over the last year, Western has undergone a significant period of transition that included a merger with Britain’s Cambrian Mining Plc, an overhaul of its executive team and the re-opening of its Willow Creek mine two months ahead of schedule.
Western operates mines in northeast B.C., West Virginia and South Wales.
In June, BIV sat down with Western president and CEO Keith Calder. (See “Western Coal Corp. primed for aggressive growth” – issue 1077; June 15 to 21.) At that time, Calder said: “Within three years, I see us being within the top tier of metallurgical coal producers worldwide.”
Before the acquisition, Western was expecting to increase its production more than 60% by 2013.
Walter will acquire all of Western’s outstanding shares for $11.50 per share in cash, which represents a 56% premium to Western closing share price of on November 17 – the day before Walter announced it had submitted a proposal to Western.
Western’s share price on the TSX rose 11% to $11.49 during mid-day trading Friday.
The deal is expected to close in the second quarter of 2011.
In an acknowledgement of the federal government’s recent block of the acquisition of Potash Corp. by a foreign firm, Leonard said: “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."