US coal miners to merge in $5.2 billion deal

Saint Louis, Missouri-based coal miner Arch Resources Inc. (NYSE:ARCH) and Consol Energy Inc. (NYSE:CEIX), based in Canonsburg, Pennsylvania, announced that they will combine in a “merger of equals” to create Core Natural Resources in a business valued at $5.2 billion. Under the terms of the agreement, Arch Resources shareholders will receive a fixed exchange ratio of 1.326 shares of Consol common stock for each share of common stock held by Arch. Arch Resources currently has a market cap of $2.29 billion following a 24% tumble in its share price, while Consol Energy saw a milder decline of 5.8% to a market cap of $2.78 billion market. Arch CEO Paul Lang will serve as Core Natural’s CEO and hold a board seat; Consol President and CEO Jimmy Brock will become executive chairman of the board of Core Natural Resources, while Consol President and CFO Mitesh Thakkar will serve as president and CFO of the combined company.

“With mining operations and terminal facilities in six states, the combined company will own 11 mines, including one of the largest, lowest cost and largest thermal coal mining complexes in North America and one of the largest, the lowest costs and the highest. quality metallurgical coal mine portfolios in the US,” the companies said.

Last year, the two companies sold about 101 million tonnes to steelmakers, industrial and power generation customers. Core Natural Resources would have a market cap of ~$5.2 billion as of August 19, 2024 on a pro-forma basis and would have generated free cash flow of ~$1.4 billion. According to the companies, the merger will generate $110-140 million in annualized costs and operational synergies within 6-18 months of closing.

Over the past two years, the two companies have seen their revenue shrink as the U.S. moves away from coal-fired power generation to cleaner fuels, primarily natural gas and renewable energy. Last quarter, Arch Resources posted Q2 GAAP EPS of $0.81, $0.92 below Wall Street consensus, while Q2 revenue of $608.75M (-19.6% Y/Y) beat with $46.45M. Q2 GAAP. Consol Energy reported Q2 coal revenue of $384 million, good for a 26% y/y decline.

By Alex Kimani for Oilprice.com

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