New light was shed on the direction of one of B.C.’s largest coal producers last week when one of its key shareholders urged the company to put itself up for sale.
On July 17, Walter Energy (NYSE:WLT), which operates three coal mines in northeastern B.C., received a letter from Audley Capital Advisors LLP imploring the coal company to sell itself to generate a return for shareholders.
The letter, addressed to Walter Energy chairman Michael Tokarz, was sent less than a month after Keith Calder, the company’s Vancouver-based CEO, resigned over “differences of opinion concerning management philosophy.”
Calder’s departure, scheduled for July 31, comes just four months after he landed the job following a $3.3 billion buy out of his previous company, Western Coal (see “Walter Energy’s Vancouver-based CEO bows out amid takeover speculation” – issue 1134; July 19 to 25).
Some analysts speculated the executive shift might be related to a potential sale of the company, though there’s no evidence to back that up.
Either way, Davenport & Co. LLC analyst Christopher Haberlin believes Calder’s departure increases the possibility that Walter could be acquired.
He pointed out that the company is a pure play steel-making coal producer, which means that it would be an attractive asset for a steel-maker.
“Without a CEO the company is … in somewhat of a disarray, and it creates the opportunity for a potential buyer to go directly to the board and say, ‘Here is our offer,’” said Haberlin. “If the board does not want to do it, something could be taken directly to shareholders in a hostile takeover.”
London-based Audley Capital, which owns 1.5% of Walter and played a key role facilitating its merger with Western Coal, took the same stance.
“We are concerned that the company now lacks the strong leadership to deliver confidently on its plans,” wrote Audley managing partner Julian Treger.
Audley further pointed out that the company’s lack of direction hindered its share value prior to its acquisition of Western Coal, noting that its multiple rating is at a discount to domestic and global peers. The investment company also said it has had contact with a “number of parties” that have indicated interest in buying the company.
On July 19, Walter issued a press release acknowledging receipt of the Audley letter, adding that its share price had appreciated 310% since January 1, 2007.
Neil Winkelmann, Walter’s Vancouver-based president of Canadian and European operations, wouldn’t confirm or deny rumours about a potential sale of the company.
Audley has asked for a response to its letter by August 5.