M&A Value For American Coal Players? (WLT, KOL, CNX, BTU, ANR)
Walter Energy, Inc. (NYSE: WLT) is the next M&A target if the daily rumor mill has any truth to it. The rumor is that Anglo American is weighing on whether or not to make a $120.00 per share acquisition offer.…
If the rumor is true, the deal would be valued at $7.5 billion and it only highlights the value of coal for industry. Walter Energy produces and exports metallurgical coal for the steel industry and its stock had been faltering considerably of late. Disappointing earnings and management turmoil have been attributed to much of Walter’s woes so far this year.
What is interesting is that a Bloomberg report this morning quotes a fund manager saying that Anglo American is not a likely bidder. Go figure.
Elsewhere in more general coal movers, Market Vectors Coal ETF (NYSE: KOL) is up almost 4% at $41.29. CONSOL Energy Inc. (NYSE: CNX), valued at $10.3 billion, is up 4.6% at $45.62. Peabody Energy Corp. (NYSE: BTU), valued at $13 billion, is up 4.8% at $47.85. Alpha Natural Resources, Inc. (NYSE: ANR), valued at $7.3 billion, is up 7.2% at $32.42.
What is interesting is that Walter Energy’s earnings estimates are $10.47 EPS for 2011 and $12.45 EPS. Coal companies usually trade with a sub-market P/E multiple. Still, even if things flatten and the estimates in 2012 only match this year’s estimates then Walter trades at about 8.4-times expected earnings. It pays only 0.6% in dividend yields.
Even after an 18% pop to $88.69 after closing at $74.99 yesterday. The 52-week trading range is $69.33 to $143.76. As with all reports and rumors, none are gospel until a deal is formally announced.
JON C. OGG
Contact [email protected] for any questions or corrections.
Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.
