Under the proposal, which is subject to regulatory and shareholder approvals, Western Canadian will acquire Cambrian for £28.8 million.
The announcement was made on Christmas eve and offered Cambrian shareholders 0.75 common shares of Western Canadian, valuing Cambrian shares at 24.375 pence when Western Canadian shares closed at 32.5 pence on December 23.
This price for Cambrian shares was some 39% higher from its close on December 15 which was the last day of trade prior to the discussions.
Should the merger be successful Western Canadian will have complete ownership of three coal mines and two wash plants in Canada’s North eastern British Columbia along with two coal mines and two wash plants in USA’s West Virginia.
Western Canadian said the combined entity will have future coal production potential of up to 10 million tonnes per annum from the existing assets.
Other assets in the merged portfolio would include a 50.6% stake of junior Welsh cast coal producer Energybuild Group, 20% in Toronto listed Northern Energy & Mining, 45% of Xtract Energy, an early stage energy sector technology investor, and 100% of a small scale gold and antimony mine in Victoria, Australia.
At the time of the merger announcement Cambrian owned 34% of Western Canadian shares.
“This will create an enlarged company that can better endure the current economic uncertainty and position itself for future growth and potential for the enlarged company to achieve more together than each company would on its own,” Western Canadian chief executive John Hogg said of the proposal.
“A business combination with Western offers the opportunity to combine two sets of quality assets and personnel, creating a company with the ability not just to survive the current economic climate but also to build shareholder value for the long term,” Cambrian chief executive Mark Burridge said.
On New Year’s Eve, Cambrian entered into a conditional agreement with Western Canadian for the latter to provide a loan of $US36 million to a Cambrian subsidiary company to repay existing debts under a financing facility with Investec Bank.
The loan arrangement is connected to the merger discussions underway.
