NEW YORK (AP) -- Audley Capital Advisors LLP said Monday that it can significantly improve Walter Energy Inc.'s performance and wants to replace half of the metallurgic coal company's board. But a proxy fight is brewing after Walter fired back in a letter to shareholders that the British hedge fund has made "serious omissions" in its proxy statement.
Audley is asking shareholders to vote for its five nominees for the board at the annual shareholders meeting in April. The company said it believes that Walter's inherent value is not reflected in its current share price and its board nominees possess the mining and public company experience necessary to unlock that potential.
The hedge fund urged Walter in 2011 to consider a sale of the business and later suggested other smaller strategic changes, such as spinning off its U.K. coal operations. Audley said Walter's board and management were not forthcoming in discussions.
It said in a letter to shareholders that the board "has been dominated for too long by a clique of long-time directors who have not worked in the best interest of stockholders".
Walter's Chairman Michael T. Tokarz and CEO and Director Walter J. Scheller III countered in a letter that Audley's campaign to replace five of its nine independent directors has a number of "troubling aspects". They said the firm's proxy statement contains serious omissions about the background and history of its nominees, including unmentioned insider trading charges, deficient governance and misrepresentations of experience.
Walter said its board reviewed the slate of nominees and determined that individually and collectively they lack the qualifications and experience to be suitable candidates. It also said the company is already focused on improving shareholder value by lowering debt, expenses and finding alternatives for its underperforming assets.
Walter also noted that Audley holds less than one-tenth of one percent of the company's shares, and only one individual on its slate of nominees has ownership of any shares. They said this is not a sign that it is investment in shareholders' best interests.
Shares of Walter Energy, based in Birmingham, Ala., fell $1.2, or 4.5 percent, to $28.13 in afternoon trading. The stock has traded in a 52-week range of $27.80 to $69.41.