Western Coal Corp. has agreed to be taken over by Walter Energy Corp. of Florida, as the two mid-sized coal producers ended weeks of negotiations with a deal that values the Vancouver-based company at $3.3-billion.
Walter , which recently became Western Coal's largest shareholder, is offering to buy the remaining stock for $11.50 per share in cash or shares of the Tampa-based company.
"This is a transformative transaction at a time when global demand for metallurgical coal is surging," Joe Leonard, interim chief executive officer of Walter Energy, said in a statement.
The Canadian company's assets are a "unique fit" for Walter Energy and are projected to increase output by more than 60 per cent over the next 2 1 / 2 years, he said.
Western Coal is expected to add to Walter Energy's earnings per share in the first full year following the close of the transaction.
"Our combined production capacity and geographic footprint leaves us extremely well positioned to benefit from favourable 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," Mr. Leonard said.
Western Coal's president and CEO, Keith Calder, said his company's shareholders would benefit from owning about 14 per cent of the combined company following the transaction - which caps the amount of cash Walter will pay at $2.1-billion.
"With its size and financial strength, the combined business will have future growth opportunities that neither one of us would have on our own," Mr. Calder said.
Walter is offering $11.50 in cash of 0.114 of a Walter share but there are provisions in the deal that Western Coal shareholders will receive a combination of both if more than 70 per cent of the total price is paid in cash.
The deal requires the support of two-thirds of votes cast by Western Coal shareholders, including Walter Energy and Audley Capital Advisors, which has been the Canadian company's largest shareholder.
Western Coal's directors have agreed to a $99-million breakup fee under certain circumstances if the transaction isn't completed.
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