One of B.C.’s biggest coal players saw its share value soar earlier this month after rumours surfaced that it could be the subject of a takeover bid.
The London-based Times reported that mining giants Anglo American PLC (LSE:AAL) and BHP Billiton (NYSE:BHP) were considering separate bids for Walter Energy (TSX:WLT), an Alabama-based steel-making coal producer with three mines near Tumbler Ridge.
The rumours ignited an immediate frenzy of trading activity in Walter shares, pushing the company’s stock value up more than 20% to $90.35 on Sept. 7.
The Times didn’t cite any particular sources, but the rumours came during a less-than-favourable summer for Walter, which has seen its share value drop 48% between May and August to a 52-week low of $69.54 amid management trouble and shareholder discontent.
In July, Business in Vancouver reported the company’s Vancouver-based chief executive, Keith Calder, had resigned citing differences in “management philosophy.” (See “Walter Energy’s Vancouver-based CEO bows out amid takeover speculation” – issue 1134, July 19-25.)
Calder’s resignation came just months after a $3.3 billion takeover deal that saw his previous company, Western Coal, taken out by Walter.
In a one-on-one interview in June, Calder told BIV he had no plans to leave the company.
Within hours of his resignation, rumours began to swirl that Calder’s departure was related to a potential sale of the company.
A week later, BIV reported that one of Walter’s key shareholders, London-based Audley Capital Advisors LLP, had urged the company to put itself up for sale. (See “Walter energy shareholders urges the company to sell” – issue 1135, July 26-August 1.)
In a July 17 letter to shareholders, Audley claimed the company lacked “strong leadership.”
Davenport & Co. LLC analyst Christopher Haberlin told BIV at the time that Calder’s departure increased the possibility that Walter could be acquired.
Despite the recent surge in its stock price amid takeover rumours, Walter said September 7 it was “not aware of any corporate developments to account for” the trading activity.
Five days later, the company named Walt Scheller, the company’s president of U.S. operations, its new CEO.
Walter’s stock value has since pared back to $82.48 per share.
Earlier this summer, the sector saw two major mining companies increase their stake in B.C. coal deposits.
In August, Anglo American announced a deal to take full control of the Peace River Coal Partnership, which operates the Trend mine near Tumbler Ridge.
A week earlier, Switzerland-based diversified miner Xstrata (LSE:XTA) paid $147 million to buy privately held First Coal Corp. and take control of its exploration properties in northeast B.C.
Mike Plaster, a Vancouver coal analyst with Salman Partners, said the recent merger and acquisition activity in B.C.’s coal sector highlights the strategic value of many projects.
Said Plaster: “I think the increased M&A activity that we’ve seen recently involving metallurgical coal assets in general reflects the desire to secure additional supply in a rapidly consolidating market, particularly now that the equity prices of most of the publicly traded met coal companies have come off the highs earlier this year.” •
