VANCOUVER — Weeks of negotiations culminated in U.S. coal producer Walter Energy's announcement Friday it will buy Vancouver's Western Coal Corp. for $3.3 billion — a deal that will create one of the world's top providers of steel-making coal.
"We have reached a definitive agreement on a truly transformational transaction for both companies, creating the leading publicly traded, pure-play metallurgical coal producer globally," Joe Leonard, interim chief executive of Walter Energy, told a conference call.
Western Coal's (TSX:WTN) stock soared nearly 12 per cent to $11.53 in midday trading on the Toronto Stock Exchange.
It was the most active issue on the Canadian market, with 56.6 million shares changing hands — more than four times the volume of the next most active stock.
Western Coal shares had already jumped last month after it announced it was in exclusive talks with Walter, based in Tampa, Fla.
Walter (NYSE:WLT), which recently became Western Coal's largest shareholder, is offering to buy the remaining stock for C$11.50 per share in cash or shares of the U.S. company.
The U.S. coal company's shares traded at US$109.12 on the New York Stock Exchange around midday, a gain of about three per cent.
Western is a "great fit" with Walter when it comes to accessing global markets where metallurgical coal is in high demand, Leonard told the call.
"Walter's focus on customers in South America and Europe will blend well with Western's transportation-advantaged access to Asian markets, especially Japan, Korea and China, the latter of which is now importing 35 million tons of metallurgical coal annually," he said.
"In fact, Western is probably the only major producer serving the Pacific metallurgical markets with unconstrained port infrastructure."
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 C$2.1 billion.
With world steel production expected to grow by 50 per cent over the next decade, the combined company expects to boost production by more than 45 per cent over the next few years, Calder told the call.
"We expect it will provide us with new business opportunities, which might not have been available if either of the companies were seen on a stand-alone basis," Calder said.
— The Canadian Press