U.S. Coal Miners to Merge in $5.2B Deal

Saint Louis, Missouri-based coal miner Arch Resources Inc. (NYSE:ARCH) and Canonsburg, Pennsylvania-based Consol Energy Inc.(NYSE:CEIX) have announced they will combine in an all-stock "merger of equals" to create Core Natural Resources in a deal valued at $5.2B. Under the deal terms, Arch Resources shareholders will receive a fixed exchange ratio of 1.326 shares of Consol common stock for each share of Arch common stock owned. Currently, Arch Resources has a market value of $2.29-billion following a 24% crash in its share price while Consol Energy has recorded a milder 5.8% drop to a market cap of $2.78-billion. Arch CEO Paul Lang will serve as CEO of Core Natural and take a seat on the board; Consol Chairman and CEO Jimmy Brock will become Executive Chairman of Core Natural Resources' board of directors while Consol President and CFO Mitesh Thakkar will serve as President and CFO of the combined company.

"With mining operations and terminal facilities across six states, the combined company will own 11 mines, including one of the largest, lowest cost, and highest calorific value thermal coal mining complexes in North America and one of the largest, lowest cost, and highest quality metallurgical coal mine portfolios in the U.S.," the companies said.

Last year, the two companies sold a combined ~101M tons to steelmakers, industrial and power generation customers. Core Natural Resources would have a ~$5.2B market capitalization as of August 19, 2024, on a pro-forma basis and would have generated ~$1.4B of free cash flow. According to the companies, the merger will generate $110M-$140M of annual cost and operational synergies within 6-18 months following the close of the transaction.

Over the past couple of years, the two companies have seen their revenues shrink as the U.S. moves away from coal-powered electricity generation to cleaner fuels, primarily natural gas and renewable energy. Last term, Arch Resources posted Q2 GAAP EPS of $0.81, $0.92 below the Wall Street consensus while Q2 revenue of $608.75M (-19.6% Y/Y) beat by $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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