Walter Energy (NYSE:WLT) Receives Mixed Reaction from Western Coal (TSE:WTN) Bid

Even though Walter Energy (NYSE:WLT) shares soared Friday, there is still mixed reaction to their bid for Western Coal (TSE:WTN), and has also generated the idea they themselves may be a takeover target.

FBR said, "Shareholders woke up yesterday (Thursday) and had a mixed reaction to WLT's merger opportunity with WTN, for several reasons: (1) expectations, which some still have, of a WLT sale, not a defensive move (we do not); (2) limited understanding of WTN, or having preconceived notions, based on the past; (3) the large premium paid; and (4) the unknown financing structure...WLT is now "half-pregnant," since it now owns, or is responsible for, 20% of WTN shares and has two weeks to come to terms with Western Coal's board...We are increasing our WLT 2010/2011 EPS estimates to $7.73/$8.39 from $7.64/$7.96, primarily to reflect the income contribution (based on consensus) from the initial 9.2% stake in WTN, which WLT is acquiring from Audley Capital."

Walter Energy closed Friday at $105.91, soaring $9.05, or 9.34 percent. FBR has a price target of $98 on Walter, and maintains their "Outperform" rating on them.

Walter Energy (NYSE:WLT) May Merge with Western Coal (TSE:WTN)

Walter Energy's (NYSE:WLT) announcement they are making a bid for Western Coal (TSE:WTN) didn't impress the market that much, although FBR Capital likes the met coal play they would bring to Walter if the deal ends up going through.

FBR said, "This morning, news broke that Walter Energy is potentially merging with Canadian met coal producer Western Coal for CN$11.50 per share of cash and stock, a 56% premium to yesterday's close. Western brings with it a nice met coal growth profile through calendar year 2012 (fiscal ends March 31), a declining cost structure, port access at Ridley, and a new and dynamic management team...We have had several days with Western Coal's management at its analyst days and also note that several U.S. executives mention Western as a good candidate for a combination."

Walter was trading at $93.94, losing $0.77, or 0.81 percent at 11:59 AM EST. FBR maintains their "Outperform" rating on them and a price target of $98.