Western Coal Corp. of Canada announced Friday that it has entered into an arrangement agreement with U.S. leading steelmaking coal producer Walter Energy, which allows the U.S. mining company to merge Western Coal to create one of the largest metallurgical coal producers in the world.

"This is a transformative transaction at a time when global demand for metallurgical coal is surging," said Joe Leonard, interim chief executive officer of Walter Energy, adding it's the right transaction at the right time.

Under the agreement, Walter Energy will acquire all of the outstanding common shares of Western Coal for 11.50 Canadian dollars (11.50 U.S. dollars) per share. The transaction represents a total enterprise value of 3.3 billion Canadian dollars (3.3 billion U.S. dollars).

The deal will create the world's leading metallurgical coal producer with total coal reserves of approximately 385 million tons. The combined company expects to produce in excess of 20 million tons of coal by 2012.

Its significant and growing production profile is balanced between Walter Energy's current high productivity assets and Western Coal's high growth assets in Canada, the United States and the United Kingdom.

"Our combined production capacity and geographic footprint leaves us extremely well positioned to benefit from favorable sector dynamics driven by increased steel production in markets such as China, India and Brazil," Leonard said.