The independent directors of Western Canadian Coal Corporation are pleased to announce that Western has entered into a definitive agreement pursuant to which Western will acquire, by way of a United Kingdom scheme of arrangement, all of the issued and to be issued ordinary share capital of Cambrian Mining Plc.
The combined operations of Western, a Canadian producer of high-quality metallurgical coal, and Cambrian, a U.K.-based diversified mining company operating in three continents, will result in a financially stronger and more diversified coal mining company. The combination of these two companies is an excellent strategic fit, as Cambrian, with a 34 percent interest in Western's common shares and C$29 million ownership of Western's convertible debentures, has been instrumental in developing Western's mines and bringing them into operation.
The acquisition values Cambrian at approximately (pnds stlg)67.4 million (or C$120 million) and each Cambrian Share at 57 pence based on the Closing Price of one Western Share of 76 pence on May 19, 2009, the last dealing day prior to the date of this announcement.
John Byrne, chairman of Western and Cambrian, said, "This transaction is demonstrably beneficial to shareholders for both companies. It simplifies the corporate structure and provides a solid foundation for growth. From the Western shareholder's perspective, Western will acquire 100 percent of low-cost metallurgical and thermal coal mines in West Virginia, 50.6 percent of a thermal coal mine in the U.K., 45 percent of Xtract Energy, and 100 percent of AGD Mining. From the Cambrian shareholders' perspective, this transaction will remove the holding company discount which we believe has affected the valuation of the company for many years and shareholders will retain a significant interest in a larger and financially stronger group."
Key Acquisition Benefits
The creation of a larger, stronger, and more diversified coal mining company will significantly increase the long-term growth prospects of the combined company. The key benefits of the acquisition are:
· Globally diversified operations, with operating coal mines in three key coal-producing regions (Western Canada, West Virginia and Wales, U.K.);
· Product diversification with the introduction of thermal coal to the existing product mix of hard coking coal and low-vol PCI coal;
· Sales diversification with a more balanced sales program into Asia, Europe and the USA;
· An expansion of coal reserves and resources by 39 percent and 50 percent, respectively;
· Increased size with the 100 percent increase in the current's coal production to approximately 3.5 million tonnes, with the potential to grow to over 10 million tonnes per year;
· Cost savings through reduced overhead, marketing and operational synergies;
· A simplified ownership structure that will increase the public float of shares by 55 percent.
Board of Directors
On completion of the merger, the board of Western will continue to be John Brodie, John Byrne, Robert Chase, John Conlon, John Hogg, who will also continue to be Western's president and CEO, Charles Pitcher and Julian Treger.
Terms of the Acquisition
The acquisition will be carried out by way of a scheme of arrangement of Cambrian under English law, involving a reduction of capital under English law, pursuant to which all of the issued and to be issued ordinary share capital of Cambrian (other than treasury shares or shares held by Western) will be cancelled, new shares issued to Western and Cambrian will become a wholly-owned subsidiary of Western.
Under the acquisition, holders of ordinary shares in Cambrian will receive 0.75 common shares in Western for every 1 Cambrian share held. Upon completion of the acquisition, Western will issue approximately 88.6 million new common shares, representing approximately 29.5 percent of Westerns issued and outstanding shares, as increased by this issue, but before any adjustment for the approximately 72.1 million common shares that the Cambrian Group will continue to hold upon the Scheme becoming effective. Upon cancellation of those shares, the new Western common shares will represent approximately 38.9 percent of Western's issued and outstanding shares.
Irrevocable agreements to vote in favor of the acquisition have been secured from Audley European Opportunities Master Fund Limited, in respect of approximately 24.7 percent of Cambrian's ordinary shares (other than treasury shares or shares held by Western).
Full details of the acquisition will be included in the Management Information Circular of Western and Scheme Document of Cambrian, which will be mailed to the Western shareholders and Cambrian shareholders, respectively. The documents are expected to be filed with the appropriate regulatory authorities and mailed to the applicable company's shareholders by May 26, 2009.
The acquisition is subject to the usual regulatory and court approvals and to obtaining the approval of a minimum 75 percent by value and more than 50 percent by number approval of those shares voted at a meeting of the shareholders of Cambrian, and the majority approval of the minority shareholders of Western, being all shareholders of Western other than Cambrian, Audley European Opportunities Master Fund Limited and their respective associates and affiliates, at a special meeting of the shareholders of Western. Western will be holding a shareholder meeting on June 24, 2009. The parties expect that the acquisition will close in early July 2009.
