Walter Energy, Inc, a US producer and exporter of metallurgical coal for the US steel industry, today launched a $3.24- billion in cash and shares takeover bid for Canadian coal miner Western Coal.

Tampa, Florida-based Walter Energy, formerly known as Walter Industries, Inc, is a leading producer of metallurgical coal and sells it mainly in the US market.

Walter Energy also produces steam coal, coal-bed methane gas, metallurgical coke, and other related products. It has high-quality coal mines in north central Alabama in the southernmost Appalachian region.

The company has annual revenues of $1.2 billion and employs approximately 2,100 people.

Vancouver, British Colombia-based Western Coal is a producer of high quality metallurgical coal from mines in northeast British Columbia, high quality metallurgical coal and compliant thermal coal from mines located in West Virginia in the US, and high quality anthracite coal in South Wales in the UK.

Under the deal, Western Coal shareholders would receive a combination of cash and Walter shares valued at C$11.50 per Western share, a premium of 55.8 per cent from Wednesday's close of $7.38 on the Toronto Stock Exchange.

The transaction values Western Coal at C$3.3 billion ($3.24 billion) based on Western's 291.1 million common outstanding shares.

The combined company will have a market capitalisation of more than $8.3 billion and would have total coal reserves of approximately 385 million tons. Walter Energy currently produces approximately 7 million tons of premium metallurgical coal, with organic expansion plans expected to increase that number to up to 9.5 million tons in 2012.

Western Coal expects to produce a total of 6.7 million tons of coal in the fiscal year ended March 2011 and has plans to produce 11 million tons during fiscal year ended March 2013.

Western said in a statement that it has entered on exclusivity talks with Walter for 14 days until 1 December while both companies carry due diligence work.

''From a strategic perspective, a transaction with Western Coal would be transformational for our company," said Joe Leonard, interim CEO of Walter Energy. "The combined company would be the leading, publicly-traded 'pure-play' metallurgical coal producer in the world, with unique and strategic access to steel producing markets in both the Atlantic and Pacific Basins.''

''The transaction would meaningfully diversify both companies' operating and development portfolios and provide new business opportunities which might not be available to either company on a standalone basis. The combined company would also be well positioned to participate in further strategic growth opportunities," he added.