Walter Energy Inc. investor Audley Capital Advisors LLP plans to nominate five candidates for the board of the metallurgical-coal producer, which it says lacks “consistent” leadership and hasn’t done enough to curb costs.
Walter has had four chief executive officers in the last five years and has a “stale and out-of-depth” board, London- based Audley said today in a statement. The mining company’s production growth and cost-reduction efforts have been disappointing, Audley said. Walter should have used more equity to fund its 2011 takeover of Western Coal Corp., Audley said.
“What we see as poor financial and strategic judgment by the current board has weighed heavily on the company and prevented it from creating value for its shareholders,” Audley co-founder and Managing Partner Julian Treger said in the statement.
Audley previously called for change at Walter in July 2011, when it said 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 had completed its acquisition of Western Coal in April 2011 for C$5.3 billion ($5.2 billion) including debt. Keith Calder resigned as CEO two months later after telling the board he had differing opinions concerning “management philosophy.” Current CEO Walter J. Scheller III was appointed September 2011, replacing interim CEO Joseph B. Leonard.
Walter rose 5.4 percent to $39.96 at the close in New York. The shares have dropped 39 percent in the past 12 months, while the Stowe Global Coal Index declined 29 percent.
Audley hasn’t discussed its proposed slate of directors with Walter, the coal company said today in a statement. Walter said it’s “fully committed to creating value for all shareholders through the successful execution of the company’s strategy.”
Walter also said in a separate statement that it appointed Mary R. Henderson, managing partner at consulting company Henderson Advisory, as an independent director.
Audley’s latest suggestions are more specific and actionable than what it said in July 2011, said Lucas Pipes, a New York-based analyst at Brean Capital LLC, said today by telephone. Pipes has a hold rating on the stock.
Audley’s proposed nominees include Treger; Eddie Scholtz, a former executive at BHP Billiton Ltd. and CIC Energy Corp.; Mark Lochtenberg, chairman of Australia’s Cockatoo Coal Ltd. and a former co-head of Glencore International Plc’s coal business; Robert Stan, the former CEO of Canada’s Grande Cache Coal Corp.; and Lawrence Clark Jr., CEO of closely held U.S. coal company JW Resources Inc.
The price of metallurgical coal has declined after a slowdown in demand from Chinese steelmakers. Asian buyers are paying $165 a ton for the raw material in the current quarter, 30 percent lower than a year earlier, according to data compiled by Bloomberg.
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