Arch Finalizes International Coal - Analyst Blog
June 16 2011 - 2:14PM
Zacks
Arch Coal Inc. (ACI) announced the successful
closing of the merger deal with International Coal Group
Inc. (ICO). Following the completion of the acquisition
International Coal will operate as a wholly owned subsidiary of
Arch.
As part of the merger, Arch completed a previously disclosed
tender offer acquiring nearly 92% of International Coal’s
outstanding shares of common stock for an aggregate value $3.4
billion, excluding costs associated with the redemption of
International Coal’s outstanding debt and fees related to the
transaction.
Adding about 13 million tons of low-cost Appalachian thermal
production to Arch's vast domestic thermal coal portfolio, the
acquisition is set to solidify the company's No. 2 position among
U.S.-based coal miners and create the U.S. coal industry's most
diversified producer.
The successful closing of the acquisition will make Arch the
second largest U.S. metallurgical coal producer and one among the
top 10 global suppliers to the steelmakers. Arch Coal expects this
transaction to add tremendous value for Arch's stakeholders in the
coming years.
This acquisition helps Arch reach out to every major U.S. coal
supply basin, enhances its low-cost structure and leadership
position in core operating regions and creates a world-class
thermal and metallurgical coal franchise.
Arch expects pro forma metallurgical sales to reach 11 million
tons in 2011. Going forward, the company expects to capitalize well
on expansion opportunities and targets to raise its metallurgical
coal output to nearly 15 million tons by 2015 to serve
under-supplied, growing global metallurgical markets.
This acquisition will also boost Arch's coal reserves by 25% to
5.5 billion tons (pro forma as of December 31, 2010), making it the
second largest reserve holder in the United States.
Of these reserves, about 431 million tons are characterized as
metallurgical quality, comprised of low volatile coal, high
volatile coal as well as pulverized injection coal. This will help
Arch to own one of the most extensive and highest quality
metallurgical coal reserve bases in the U.S. coal
industry.
Once the International Coal integration is complete Arch will
operate 24 mining complexes across five U.S. coal supply basins,
with planned pro forma coal sales of 171 million to 176 million
tons in 2011. The company will employ roughly 7,400 people
and expects pro forma 2011 revenues of more than $5 billion.
Going forward, Arch expects to yield annual synergies of $70 -
$80 million, beginning in 2012, through the transaction.
Arch Coal said it has already moved ahead with the integration
plans for these assets and expects to fully integrate International
Coal quickly over the next three to six months. Arch Coal hopes to
fully realize the target synergies from the transaction in the
first full year of operation.
Arch Coal funded the International Coal purchase with a
combination of new debt and equity offerings completed in June
2011. The company successfully executed capital markets
transactions so that it could prudently finance the acquisition,
retain its existing credit ratings and preserve a strong balance
sheet.
Based in St. Louis, Missouri, Arch Coal engages in the
production and sale of steam and metallurgical coal. The company
also ships coal to domestic and international steel manufacturers
as well as international power producers.
Arch Coal currently retains a Zacks #3 Rank (short-term Hold
rating). The company competes with Peabody Energy
Corp. (BTU) among others.
ARCH COAL INC (ACI): Free Stock Analysis Report
PEABODY ENERGY (BTU): Free Stock Analysis Report
INTL COAL GROUP (ICO): Free Stock Analysis Report
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