WTN West. Coal

 

TIDMWTN 
 
RNS Number : 3276X 
Walter Energy 
03 December 2010 
 

Walter Energy and Western Coal Agree to CAD$3.3 Billion Merger 
 
Transaction Creates the Leading, Publicly Traded, "Pure-Play" 
Metallurgical Coal Producer Globally; Combined Company Will Have 
Unique Access to Pacific and Atlantic Seaborne Markets 
 
Agreement Based on Walter's Previously Disclosed Merger Proposal 
Which Valued Western Coal at a 56 Percent Premium to Its 
Pre-Announcement Price 
 
Transaction Expected to Be Accretive to Walter Energy on an Earnings 
Per Share Basis in the First Full Year After Closing 
 
TAMPA, FL and VANCOUVER, BC -- (MARKETWIRE) -- 12/03/10 -- Walter 
Energy (NYSE: WLT) and Western Coal Corp. (TSX: WTN) (TSX: WTN.WT) 
(AIM: WTN) announced today that they have entered into an arrangement 
agreement (the "Agreement") for Walter Energy to acquire all of the 
outstanding common shares of Western Coal for CAD$11.50 per share in 
cash or 0.114 of a Walter Energy share, or for a combination thereof, 
all subject to proration. The transaction represents a total 
enterprise value of CAD$3.3 billion (USD$3.3 billion), net of cash on 
the balance sheet for Western Coal. The Agreement follows 
announcements on Nov. 18, 2010 by Walter Energy and Western Coal that 
they had begun exclusive negotiations regarding the potential 
business combination. 
 
The transaction will create the world's leading, publicly traded, 
"pure-play" metallurgical coal producer with total coal reserves of 
approximately 385 million tons(1) and a significant and growing 
production profile balanced between Walter Energy's current high 
productivity assets 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 chief 
executive officer of Walter Energy. "Western Coal has an attractive 
high-quality metallurgical coal asset base and has embarked on an 
organic growth strategy that is expected to increase production more 
than 60 percent by fiscal 2013. It is a unique 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. 
 
Keith Calder, president and chief executive officer of Western Coal, 
said, "We are pleased to be combining with Walter Energy and believe 
this transaction offers Western Coal's shareholders immediate value 
as well as future upside from their ownership of approximately 14 
percent of the combined company. The combined business will have 
substantial reserves and an experienced management team focused on 
safety, growth and shareholder value. 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 CAD$11.50 represented a 56 percent premium to 
Western Coal's closing share price of CAD$7.38 on Nov. 17, 2010, the 
day before Walter Energy announced it had submitted a proposal to 
Western Coal. 
 
Mr. Leonard concluded, "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." 
 
Transaction Details 
 
The transaction will be effected by way of a statutory plan of 
arrangement pursuant to the Business Corporations Act (British 
Columbia). Under the terms of the agreement, Western Coal 
shareholders will be permitted to exchange each of their Western Coal 
shares for, at their election, CAD$11.50 in cash or 0.114 of a Walter 
Energy share (the "merger consideration"), or for some combination 
thereof. All elections will be subject to proration if total cash 
elections exceed 70 percent of the total merger consideration to be 
paid or total share elections exceed 30 percent of the total merger 
consideration. 
 
The total amount of cash to be paid to Western Coal shareholders 
under the transaction is expected to be approximately CAD$2.1 billion 
(USD$2.1 billion) and the total number of shares of Walter Energy 
shares to be issued to Western Coal shareholders under the 
transaction is expected to be approximately 9 million. These amounts 
assume that 278.1 million Western Coal shares participate in the 
arrangement, being a fully diluted amount of 290.9 million shares, 
less the 25.3 million shares acquired under the first closing of 
Walter Energy's share purchase agreement announced on Nov. 18, 2010. 
This further assumes that the second closing under the share purchase 
agreement for a further purchase of 29.3 million Western Coal shares 
is completed for the merger consideration. Should this second 
purchase occur under a separate applicable cash option it would not 
affect the merger consideration for remaining shareholders of Western 
Coal. The exchange ratio to determine the number of shares to be 
issued to Western Coal shareholders was based on a Walter Energy 
share price of USD$99.35, which is equal to the 20-day volume 
weighted average closing price as of Dec. 1, 2010. Walter Energy has 
fully committed financing for the cash portion of the consideration. 
 
Following the completion of the transaction, Walter Energy will 
maintain its primary listing on the New York Stock Exchange under the 
symbol WLT. In connection with the transaction, Walter Energy will 
also apply for a listing on the Toronto Stock Exchange. Upon 
completion of the transaction, three directors nominated by the 
Western Coal board of directors will be added to the Walter Energy 
board of directors. The senior management team, including the CEO, 
will be announced prior to the transaction's closing. 
 
The Agreement has been unanimously approved by both companies' boards 
of directors and is expected to be completed by the second quarter of 
2011. 
 
An independent committee of Western Coal's board of directors, as 
part of the process and in accordance with applicable regulatory 
requirements, received a formal valuation of the Western Coal shares 
from National Bank Financial. In addition, National Bank Financial 
has provided an opinion that, as of Dec. 2, 2010, the consideration 
under the proposed transaction is fair, from a financial point of 
view, to Western Coal's shareholders other than Walter Energy, Audley 
Capital Advisors LLP and their respective associates and affiliates. 
The board of directors of Western Coal has also received an opinion 
from RBC Capital Markets that, as of Dec. 2, 2010, the consideration 
under the transaction is fair, from a financial point of view, to 
Western Coal's shareholders other than Walter Energy, Audley Capital 
Advisors LLP and their respective associates and affiliates. 
 
Morgan Stanley & Co. Incorporated is acting as financial advisor and 
Simpson Thacher & Bartlett LLP and Osler, Hoskin & Harcourt LLP are 
acting as legal counsel to Walter Energy. 
 
RBC Capital Markets is acting as financial advisor to Western Coal. 
Goodmans LLP is acting as Western Coal's Canadian legal counsel and 
Paul, Weiss, Rifkind, Wharton & Garrison LLP as Western's US legal 
counsel. Western Coal's UK advisors are Trowers & Hamlins LLP (legal) 
and Cenkos Securities plc (Nominated Advisor and Broker). National 
Bank Financial is acting as the independent valuator to Western 
Coal's independent committee. 
 
Regulatory Matters and Other Closing Conditions 
 
Completion of the transaction is subject to customary closing 
conditions, including Canadian court approvals, a favorable vote of 
at least (i) two-thirds of the votes cast by Western Coal 
shareholders (including Walter Energy and Audley Capital Advisors 
LLP) and (ii) a majority of the votes cast by Western Coal's 
shareholders excluding Walter Energy and Audley Capital Advisors LLP, 
at a special meeting of shareholders, and the receipt of all 
necessary regulatory approvals. Approval by Walter Energy 
shareholders is not required to complete the transaction. The 
definitive agreement includes a customary non-solicit clause 
applicable to Western Coal and provides for the payment of a CAD$99 
million break-up fee if the transaction is terminated in certain 
circumstances. 
 
Western Coal will call a special meeting of shareholders to approve 
the transaction. In connection with the special meeting, Western will 
mail an information circular to its shareholders providing further 
details of the transaction. Walter Energy beneficially owns and 
controls a total of 54,547,858 common shares of Western Coal, 
representing approximately 19.6 percent of the outstanding common 
shares of Western Coal. Walter Energy intends to vote these shares in 
favor of the transaction at the special meeting. 
 
Western Coal's shareholders are cautioned that an arrangement where 
they would receive Walter Energy shares directly will result in a 
taxable event for Canadian shareholders and shareholders in the 
United States. 
 
Conference Call Webcast 
 
Walter Energy Interim Chief Executive Officer Joe Leonard and Western 
Coal President and Chief Executive Officer Keith Calder will brief 
investors and other interested parties on Friday, Dec. 3, 2010; 11:30 
a.m. Eastern Standard Time during a conference call, which will be 
broadcast live over the Internet. Participants dialing in by 
telephone should use one of the telephone numbers and the passcode 
below. Participants are urged to call in several minutes ahead to 
register their participation. Those interested in listening to the 
Web cast may do so by visiting either Walter Energy's Web site at 
www.walterenergy.com or Western Coal's Web site at 
www.westerncoal.com. An archive will be available on both sites for 
up to 30 days. 
 
What: 
Walter Energy and Western Coal Investor Conference Call 
 
When: 
Dec. 3, 2010; 11:30 a.m. Eastern Standard Time 
 
Where: 
Toll-Free Conference Call Number: 888-989-4414 
Alternate Conference Call Number: 1-630-395-0188 
Reservation Passcode: WLT 
 
OR 
 
www.walterenergy.com or www.westerncoal.com 
 
About Walter Energy 
Walter Energy is a leading U.S. producer and exporter of premium hard 
coking coal for the global steel industry and also produces steam 
coal and industrial coal, metallurgical coke and coal bed methane 
gas. The Company has annual revenues of approximately $1.2 billion 
and employs approximately 2,100 people. For more information about 
Walter Energy, please visit the Company Web site at 
www.walterenergy.com. 
 
About Western Coal 
Western Coal is a producer of high quality metallurgical coal from 
mines in northeast British Columbia (Canada), high quality 
metallurgical coal and compliant thermal coal from mines located in 
West Virginia (USA), and high quality anthracite coal in South Wales 
(UK). The Company is headquartered in Vancouver, BC, Canada. It is 
listed on the TSX and AIM as "WTN". www.westerncoal.com. 
 
Walter Energy Safe Harbor Statement 
Except for historical information contained herein, the statements in 
this release are forward-looking and made pursuant to the safe harbor 
provisions of the Private Securities Litigation Reform Act of 1995 
and may involve a number of risks and uncertainties. Forward-looking 
statements are based on information available to management at the 
time, and they involve judgments and estimates. There can be no 
assurance that the transaction with Western Coal will close. The 
transaction is subject to a number of closing conditions which may be 
outside of Walter Energy's control. Forward-looking statements 
include expressions such as "believe," "anticipate," "expect," 
"estimate," "intend," "may," "plan," "predict," "will," and similar 
terms and expressions. These forward-looking statements are made 
based on expectations and beliefs concerning future events affecting 
us and are subject to various risks, uncertainties and factors 
relating to our operations and business environment, all of which are 
difficult to predict and many of which are beyond our control, that 
could cause our actual results to differ materially from those 
matters expressed in or implied by these forward-looking statements. 
The following factors are among those that may cause actual results 
to differ materially from our forward-looking statements: the market 
demand for coal, coke and natural gas as well as changes in pricing 
and costs; the availability of raw material, labor, equipment and 
transportation; changes in weather and geologic conditions; changes 
in extraction costs, pricing and assumptions and projections 
concerning reserves in our mining operations; changes in customer 
orders; pricing actions by our competitors, customers, suppliers and 
contractors; changes in governmental policies and laws, including 
with respect to safety enhancements and environmental initiatives; 
availability and costs of credit, surety bonds and letters of credit; 
and changes in general economic conditions. Forward-looking 
statements made by us in this release, or elsewhere, speak only as of 
the date on which the statements were made. See also the "Risk 
Factors" in our 2009 Annual Report on Form 10-K and subsequent 
filings with the SEC which are currently available on our website at 
www.walterenergy.com. New risks and uncertainties arise from time to 
time, and it is impossible for us to predict these events or how they 
may affect us or our anticipated results. We have no duty to, and do 
not intend to, update or revise the forward-looking statements in 
this release, except as may be required by law. In light of these 
risks and uncertainties, readers should keep in mind that any 
forward-looking statement made in this press release may not occur. 
All data presented herein is as of the date of this release unless 
otherwise noted. 
 
Western Coal's Forward-Looking Information Disclaimer 
 
This release may contain forward-looking statements that may involve 
risks and uncertainties. Such statements relate to Western Coal's 
expectations, intentions, plans and beliefs including, in particular, 
statements relating to a potential strategic business combination 
between Western Coal and Walter and the terms of any such 
transaction. These statements are not guarantees of future 
performance and involve risks, uncertainties and assumptions that are 
difficult to predict. Actual outcomes and results may differ 
materially from what is expressed or forecasted in these 
forward-looking statements as a result of various important factors, 
including, but not limited to: Western Coal's ability to complete the 
business combination with Walter on the price, terms and conditions 
described or at all; the benefits of such transaction and its impact 
on Western Coal's business; changes in commodity prices; strengths of 
various economies; the effects of competition and pricing pressures; 
the oversupply of, or lack of demand for, Western Coal's products; 
currency and interest rate fluctuations; various events which could 
disrupt Western Coal's construction schedule or operations; Western 
Coal's ability to obtain additional funding on favourable terms, if 
at all; and Western Coal's ability to anticipate and manage the 
foregoing factors and risks. Additionally, statements related to the 
quantity or magnitude of coal deposits are deemed to be forward 
looking statements. The reliability of such information is affected 
by, among other things, uncertainties involving geology of coal 
deposits; uncertainties of estimates of their size or composition; 
uncertainties of projections related to costs of production; the 
possibilities in delays in mining activities; changes in plans with 
respect to exploration, development projects or capital expenditures; 
and various other risks including those related to health, safety and 
environmental matters. Readers are referred to the documents filed by 
Western Coal on SEDAR. 
 
(1)Expressed in short tons and based on each company's publicly 
disclosed reserves, which are compiled under differing technical 
standards. 
 
Walter Energy Contacts: 
Investors: 
Mark H. Tubb 
Vice President - Investor Relations 
813.871.4027 
mtubb@walterenergy.com 
 
Media: 
Michael A. Monahan 
Director - Corporate Communications 
205.745.2628 
mmonahan@walterenergy.com 
OR 
Jim Barron/Michael Henson 
Sard Verbinnen & Co. 
212.687.8080 
 
Western Coal Contacts: 
Investors: 
David Jan 
Head of Investor Relations 
604.694.2891 
david.jan@westerncoal.com 
OR 
Cenkos Securities 
Nominated Advisor and Broker 
Nick Wells/Ivonne Cantu 
+44 207 397 8900 
 
Media: 
Bobby Morse/Katharine Sutton 
Buchanan Communications 
+44 (0)207 466 5000 
bobbym@buchanan.uk.com 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 OUPEAPADESFEFEF 
 

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