Alpha Natural Resources buys Foundation Coal
Merged coal giant will be third-largest coal supplier
By Tom Stundza -- Purchasing, 5/12/2009 11:42:00 AM
Alpha Natural Resources will buy Foundation Coal for about $1.4 billion, creating one of the nation's largest coal producers in a supply industry wrestling with weak demand.
The combined Alpha-Foundation company would be a $4.2 billion company and control 59 coal mines and 14 preparation plants with combined reserves of more than 2.3 billion tons of coal, making the combined entity the nation's third largest producer after Peabody Energy and Arch Coal.
An Associated Press story says Alpha, based in Abingdon, Va., was itself the target of a takeover last year, but the proposed $2.7 billion offer by Cliffs Natural Resources was scuttled in November as the recession worsened. Not even a month later, Alpha warned that the slowing economy could shave as much as $95 million from 2009 profits.
Just about all the major coal companies have cut production estimates for this year as steelmakers and energy providers are reducing purchases, says analyst Andy Baker at Jefferies Equity Strategy in a note to clients.
Alpha is a Central Appalachian producer of both metallurgical and steam coal while Foundation has most of its operations in the Powder River Basin, although it does have some operations in Northern and Central Appalachia. “The combined entity will be the second-largest Central Appalachia producer, behind Massey Energy and slightly ahead of Patriot Coal,” Baker writes. “Nationwide, the combined company will be number three in production with 92 million tons/year compared to 223 million tons for Peabody and 133 million tons for Arch Coal.”
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