By Agency Reporter

Monday, 6 Dec 2010

LONDON: United States-based mining group, Walter Energy Incorporated has sealed a deal to buy Canada‘s Western Coal for C$3.3bn ($3.3bn) to create the world‘s leading producer of metallurgical coal used by steelmakers.

According to Reuters on Friday, the deal shows how surging global steel production, driven mainly by China, is stimulating M&A activity in the mining sector, with coal producers scrambling to take advantage of booming Asian demand.

Walter Energy will pay C$11.50 a share, a 56 per cent premium to Western Coal‘s closing price on November 17, the day before Walter Energy announced its proposal.

”This is a transformative transaction at a time when global demand for metallurgical coal is surging,” said Joe Leonard, interim Chief Executive of Walter Energy.

The enlarged company will have total coal reserves of about 385 million tonnes and expects to produce more than 20 million tonnes of coal by 2012.

Under the deal, Western Coal shareholders will get about C$2.1bn in cash and own about 14 per cent of the enlarged company.

The transaction is expected to boost Walter Energy‘s earnings per share in the first full year after completion which is expected by the second quarter of 2011.

Walter Energy had said on November 18 that it was in talks to buy its Canadian peer and on Thursday extended the 14-day period for exclusive talks.

Source: Punch