On December 3, 2010, Walter Energy and Western Coal Corp. announced that they had entered into an 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 pro-ration. The transaction represents a total enterprise value of CAD $3.3 billion, net of cash on the balance sheet for Western Coal. Approximately CAD $2.1 billion in cash and 9 million shares of Walter common stock are expected to be paid and issued to Western Coal shareholders in the merger. The acquisition will be financed in part with the proceeds of a $2,725 million facility arranged by Morgan Stanley Funding, Inc., The Bank of Nova Scotia and Credit Agricole Corporate, the proceeds of which also will be used to pay certain fees and expenses in connection with the acquisition, to refinance all existing indebtedness of Walter Energy and Western Coal Corp. and to provide for the ongoing working capital of Walter Energy and its subsidiaries.
The transaction will create the world’s leading, publicly traded, “pure-play” metallurgical coal producer with total coal reserves of approximately 385 million tons 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. The Agreement has been unanimously approved by both companies’ boards of directors and is expected to be completed by the second quarter of 2011.
The Firm also represented Walter Energy in connection with its separate agreement on November 17, 2010 to purchase from affiliates of Audley Capital common shares of Western Coal representing 19.8 percent of the outstanding common shares of Western Coal for CAD $11.50 per share, or a total consideration of approximately CAD $630 million, subject to adjustment in certain circumstances. Audley Capital has the right to elect to receive Walter common stock for a minority of its shares on the same terms as other Western Coal shareholders; Audley Capital will receive cash for the remainder of its shares.
The Simpson Thacher attorneys working on these transactions are: Peter Gordon, Adam Signy, Thomas Lamprecht, James Connor, Austin Hill and Oliver Vallee (M&A); James Cross and Vanessa Bressler (Credit); Michael Naughton (Antitrust); Amie Broder (Tax); Alvin Brown, Aimee Adler and David Schneider (Executive Compensation and Employee Benefits); Michael Isby (Environmental); and Beatie Branch (Real Estate).