Walter Says Audley Move May Be ‘Disruptive'

Walter Energy Inc. (WLT), said investor Audley Capital LLC’s proposal to change the U.S. metallurgical- coal producer’s board may be “disruptive.”

Audley, which announced Feb. 19 it intended to nominate five candidates to Walter’s board, hasn’t communicated directly with the coal company, Walter Chief Executive Officer Walter Scheller said today.

“We’re always willing to have constructive conversation with our owners about ways that the board and management team can enhance shareholder value,” he said on Walter’s fourth- quarter earnings conference call. “It’s unfortunate that Audley has chosen to take a course that may prove disruptive to our company.”

Audley says Walter has lost shareholders’ confidence after missing earnings expectations, failing to control costs and accumulating too much debt with its 2011 purchase of Canada’s Western Coal Corp. It also said the company lacked consistent leadership by having four CEOs in the last five years. London- based Audley owns 21,000 shares of Walter according to data compiled by Bloomberg.

“We believe some pressure from shareholders to cut costs and improve operations could serve Walter well,” Paul Forward, an analyst at Stifel Nicolaus & Co. Inc. in Baltimore, said in a note yesterday.

“We fear that the effort to replace board members revives the 2011 dispute that led to the surprising early exit of former Walter CEO (and Western Coal CEO) Keith Calder,” he said. “In our view, neither side in a reopening of the dispute would be likely to emerge spotless.”

Shares Decline

Walter has posted two straight quarterly losses after prices for metallurgical coal fell amid slowing economic growth in China, the biggest steelmaker. Walter said yesterday its average sales price fell 39 percent to $149 a metric ton in the quarter.

The fourth-quarter loss was $66 million, excluding restructuring costs and other one-time items, Birmingham, Alabama-based Walter said in a statement yesterday after the close of regular U.S. trading. That was wider than the $61 million average of 10 analysts’ estimates compiled by Bloomberg.

Revenue declined 32 percent to $478.8 million, compared with the $506.1 million average of 12 estimates. Selling, general and administrative costs fell 13 percent to $28.8 million. Walter said it sees 2013 production and sales of metallurgical coal in line with last year.

The shares dropped 7 percent to $34.19 at 11:40 a.m. in New York.

Audley’s proposed nominees include Julian Treger, its co- founder and managing partner; 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.

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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