March 25 U.S. coal miner Walter Energy Inc
struck back on Monday against the British hedge fund
that says it can improve the miner's performance by replacing
half of its board, citing "serious omissions" in Audley Capital
Advisors LLP's proxy statement.
In a letter to shareholders, Walter Energy said the hedge
fund's statement contains omissions regarding the background of
its nominees, and noted that one of Audley's candidates has been
implicated in an insider trading case. It said also that Audley
controls well under 1 percent of its shares.
Audley said in February that it would nominate five
candidates for election to the coal miner's board, arguing that
poor management, not a tough market, has been behind the
company's poor financial results.
In Monday's letter, signed by Walter Energy Chairman Michael
Tokarz and Chief Executive Walt Scheller, the company said it
had reviewed Audley's nominees and that they lack the leadership
experience needed to be board members.
The company also said Audley failed to disclose that one of
its nominees, Robert Stan, is currently defending himself
against charges of insider trading and tipping when he was chief
executive of Grande Cache Coal.
In a notice of hearing dated Dec. 5, 2011, the Alberta
Securities Commission accused Stan of sharing material
information with his wife, who then sold securities of Grande
Cache. It said he had also exercised options to buy securities
of Grande Cache during the same period. On the regulator's
website, the case is listed as "decision on merits pending".
Walter Energy, which has operations in Western Canada, the
United States and the United Kingdom, mainly produces
metallurgical coal, used to make steel.
AUDLEY FILES PROXY
Walter Energy also questioned Audley's representation of the
leadership roles held by nominee Edward Scholtz, noting that
Audley's proxy statement lists him as a current director of
Talon Metals Corp.
Scholtz, former chief executive of Talon, is not listed as a
director on the company's website, and a Talon management
information circular lists Feb. 8, 2012, as the date of his
departure from the company.
Walter also disputed Audley's assertion that Scholtz was
chief operating officer of CIC Energy Corp from 2008 to 2012,
saying that role was held by someone else in 2007 through 2010.
CIC's annual disclosures show that Tore Horvei was chief
operating officer from January 2007 to at least the end of
Stan and Scholtz could not immediately be reached to comment
on the Walter Energy statement.
Separately on Monday, Audley said it had filed definitive
proxy materials, and urged shareholders to vote for its slate.
"We firmly believe that the inherent value in Walter Energy
is not reflected by the current share price, and remain
confident that our five highly qualified and experienced board
nominees possess the mining and public company experience
necessary to unlock the underlying near- and long-term value at
the company," Julian Treger, managing director of Audley
Capital, said in the statement.
Walter Energy's major shareholders include J.P. Morgan Asset
Management, with a 6.9 percent stake as of Dec. 31, according to
Thomson Reuters data, and Harris Associates LP, with a 5.0
percent stake as of Dec. 31. The company's top 10 investors own
just over 40 percent of its outstanding shares.
The miner said it is working to reduce its debt and improve
liquidity, and that it is bringing down its cost of production.
Shares of the coal producer fell 4.8 percent to $28.04 on
Monday on the New York Stock Exchange. The stock is down more
than 22 percent so far this year.