The transaction, initially announced November 18, created the top publicly traded pure-play metallurgical coal producer in the world and will provide the merged company with access to the Pacific and Atlantic seaborne markets.

The producer will hold 385 million tons of reserves, mining 20Mt or more annually by 2012.

It also now has a growing production profile balanced between Walter's current high-productivity assets and Western Coal's high-growth assets in Canada, the US and the UK, and will be the only producer with cost-advantaged transportation access to the Asian and South American seaborne metallurgical coal markets.

"This is a transformative transaction at a time when global demand for metallurgical coal is surging," Walter interim chief executive officer Joe Leonard said.

"Western Coal has an attractive high-quality metallurgical coal asset base and has embarked on an organic growth strategy that is expected to increase production more than 60 per cent by fiscal 2013.

“It is a unique strategic fit with Walter Energy's large-scale, high-productivity mines which produce premium-quality metallurgical coal for customers in South America and Europe.”

Leonard said the two companies’ combined production capacity and geographic footprint positioned the merged entity well to benefit from increased steel production in markets such as China, India and Brazil.

“Bottom line, this is the right transaction at the right time," he said.

Walter believes the merger will be accretive to its earnings per share in the first full year following the transaction’s close.

It will also maintain continued strong operating cash flows from existing assets as well as high return on investment capital from its development projects.

"We … believe this transaction offers Western Coal's shareholders immediate value as well as future upside from their ownership of approximately 14 per cent of the combined company,” Western president Keith Calder said.

“The combined business will have substantial reserves and an experienced management team focused on safety, growth and shareholder value. With its size and financial strength, the combined business will have future growth opportunities that neither one of us would have on our own."

The agreement has been unanimously approved by both companies' boards of directors and is expected to be completed by the second quarter of 2011.