Anglo, BHP weigh up Walter: reports

SPECULATION that BHP Billiton and Anglo American could be eyeing a takeover of Walter Energy has seen the North American coal producer’s shares surge by as much as 30%.
Anglo, BHP weigh up Walter: reports Anglo, BHP weigh up Walter: reports Anglo, BHP weigh up Walter: reports Anglo, BHP weigh up Walter: reports Anglo, BHP weigh up Walter: reports

An Alabama overland conveyor structure linking Walter Energy's operations. Courtesy Walter Energy.

Lou Caruana

A report in London’s The Times newspaper said Anglo American was considering a $US120-a-share offer for Walter, as was BHP Billiton.

The companies are said to be keen to expand their metallurgical coal footprint and increase exports while coking coal prices near record levels and the industry reaches a consolidation phase.

Walter’s shares rose $15.99, or 21%, to $90.98 in New York Stock Exchange composite trading after earlier reaching $97.30, which was its biggest intraday gain since March 8, 1995.

Its shares came back off their highs after the company said in a statement to the New York Stock Exchange it was not aware of any “corporate developments” accounting for the movement in its share price.

Walter, which took over Canada’s Western Coal Corporation in April for $C3.3 billion, is still without a permanent chief executive officer since Keith Calder resigned in June.

Walter earlier this year dismissed a claim by one of its largest investors that it lacked strong leadership for growth and should put itself up for sale.

Audley Capital said post-buyout of Western Coal earlier this year, it was concerned Walter did not have the sufficient executive management needed to deliver on plans to earn highest-ever revenues in 2011 and ramp up production to 20 million tons annually by 2013.

Walter responded by highlighting both its increasing share price and the committed and experienced management team at the helm of the company.

For the period ended June 30 Walter’s net earnings were $US107.4 million, down from $116.2 million year-on-year, while costs jumped 157% to $619.3 million.

Global steelmaker demand sent Walter’s metallurgical coal revenue up more than 88% to $773 million, from $410.6 million.

The metallurgical coal industry is undergoing a global consolidation, with Peabody Energy teaming up with ArcelorMittal to lodge a revised $A4.9 billion offer for Queensland-based producer Macarthur Coal which was this week accepted by its directors.

Recent rumours that Anglo American would put in a competitive bid for Macarthur were unfounded.

Arch Coal will emerge as a global coking giant after it acquired International Coal Group for $US3.4 billion earlier this year and will be ready to pick up sales to Asian steelmakers at a time when Queensland coal producers are still recovering from the floods.

The acquisition will increase Arch’s reserves by 25% to 5.5 billion tons. It comes as the North American coal industry undergoes a rationalisation, with fellow US producer Alpha Natural Resources becoming the largest coking coal producer in the country after swallowing Massey Energy.

Arch will be the US’ second largest coking coal producer after Alpha once the acquisitions are completed.

As part of the takeover Arch will acquire ICG’s 13 active mines, along with one major mining complex under development, across three coal basins in the states of Illinois, Kentucky, West Virginia, Maryland and Virginia.