Bloomberg News

Walter Jumps on Report of Takeover by Anglo American, BHP

October 13, 2011

(Updates with closing share price in second paragraph.)

Oct. 13 (Bloomberg) -- Walter Energy Inc., a U.S. producer of steelmaking coal, jumped 13 percent in New York after the U.K.’s Independent reported that Anglo American Plc and BHP Billiton Ltd. may bid for the company.

The potential bidder may be advised by JPMorgan Chase & Co. and Goldman Sachs Group Inc., the London-based newspaper said, without citing anyone. Brazil’s Vale SA and Cia. Siderurgica Nacional SA may also may bid, the newspaper said. The shares rose to $75.22, the biggest gain in five weeks.

Walter investor Audley Capital Advisors LLP said in July that the Birmingham, Alabama-based company should explore a sale because it lacked the leadership to take advantage of an “unprecedented market opportunity” after coal prices jumped. Walter appointed Walter J. Scheller III as Chief Executive Officer on Sept. 12. He replaced interim CEO Joseph B. Leonard and followed Keith Calder, who resigned as CEO in June after telling the board he had differing opinions concerning “management philosophy.”

Demand from steelmakers in China and flood-related supply disruptions in Australia have driven prices for coal to record highs. Low-volatility coking coal traded at $270 a ton, Knoxville, Tennessee-based Energy Publishing said in a report last week.

Emily Blyth, a spokeswoman for London-based Anglo, declined to comment, as did Ruban Yogarajah, a spokesman for Melbourne- based BHP, and Paul Blalock, a spokesman for Walter.

Coal M&A

Vale doesn’t respond to market rumors, an official at the company’s press office who asked not to be named citing Vale policy, said in a telephone interview. No one at CSN returned calls and e-mails seeking comment.

Buying Walter could allow Anglo to replace assets it might lose in Chile, Dominic O’Kane, an analyst at Liberum Capital Ltd. in London, said today in a note. Chilean copper producer Codelco said yesterday it plans to exercise an option to buy as much as 49 percent of Anglo’s unit in the South American country.

There were $20.5 billion of takeover offers for coal miners valued at $100 million or more announced in the first nine months of 2011, compared with $10.4 billion in the year-earlier period, according to data compiled by Bloomberg.

Alpha Natural Resources Inc. bought rival U.S. coal producer Massey Energy Co. in June for $7.1 billion. Peabody Energy Corp. and ArcelorMittal agreed in August to pay A$4.8 billion ($4.9 billion) for Australia’s Macarthur Coal Ltd., which like Walter produces metallurgical coal.

Walter acquired Vancouver-based Western Coal Corp. in April for C$5.3 billion ($5.2 billion). Calder was the former CEO of Western Coal.

Walter operates mines in Alabama, West Virginia, British Columbia and Wales.

--With assistance from Firat Kayakiran and Jesse Riseborough in London and Peter Millard in Rio de Janeiro. Editors: Simon Casey, Tina Davis

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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