Audley has accused Walter of mismanagement and says in its proxy statement that it can
significantly improve the Alabama-based company’s performance by replacing half of its board members. It has asked shareholders to vote for its nominees at a meeting on April 25.
The UK-based Audley first said in February that Walter officials had “failed to deliver shareholder value” in the time since the producer acquired Western Coal.
“Audley Capital believes that Walter Energy has high quality metallurgical coal assets in established mining jurisdictions with scope for significant growth, with a market position that should enable it to generate substantial free cash flow going forward,” Audley said at the time.
“However, following the acquisition of Western Coal in November 2010, Walter Energy has consistently failed to deliver shareholder value as a result of questionable financial decisions and poor management.”
After reviewing the proxy statement from Audley, Walter said in a shareholder letter that there were “troubling aspects” of Audley’s campaign and that the statement contained “serious omissions regarding the background and history of its nominees”
Walter chairman Michael Tokarz and chief executive officer and director Walter Scheller said the board’s nominating and corporate governance committee reviewed the Audley slate and determined that, both individually and collectively, they lacked the “qualifications and experience to be suitable board candidates”
Moreover, the two said, Walter Energy already had a balanced mix of experience and expertise, with two of the 10 seat holders joining the board over the last two years.
Additionally, Walter said Audley was looking at short-term gains only at the expense of other shareholders and that it offered no plan that was different from what the company’s board was already doing.
“We are intensely focused on enhancing shareholder value by reducing debt levels, continuing to reduce SG&A [selling, general and administrative] expenses, and identifying alternatives for underperforming assets,” the executives said.
“These initiatives are consistent with our objective of optimizing our portfolio and ensuring that each of our operations is cash flow positive and on a clear path to profitability under current market conditions and outlook.”
As for current market conditions, Walter said it was not alone in its strife and that it was taking all possible steps to move ahead positively.
“Over the years your board has created long term value for all stockholders with judgment and integrity,” Walter officials said in the letter.
“We recognize and accept the challenge of responding to the recent and dramatic decline in met coal pricing that has affected every company in this industry. Your board and management have taken every reasonable step to respond to that trend and to position the company for future profitable growth as conditions improve.
“That work should accrue to your benefit, not that of others. Now is not the time to reverse course.”
Walter’s operations are in the US, Canada and the UK.
