alpha natural resources

alpha natural resources

ABINGDON, — Alpha Natural Resources will buy Foundation Coal for about $1.4 billion, the companies announced Tuesday, creating one of the nation's largest coal producers.

Foundation shares jumped 27 percent in premarket trading, or $6.26, to $29.50. Alpha shares fell 34 cents to $28.52.

A number of large coal companies have said that they are scouting for acquisitions, including Alpha, as the industry wrestles with weak demand.

The all-stock buyout of Foundation, assuming $530 million in debt, is valued at about $2 billion by the companies. The combined company would have had pro forma revenue of $4.2 billion last year.

The companies would control 59 coal mines and 14 preparation plants and have combined reserves of more than 2.3 billion tons of coal, making the combined entity the nation's third largest producer.

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.

Nearly all the major coal companies, from Peabody Energy Corp. to Massey Energy, have cut production estimates for this year.

Alpha is attempting to expand operations and potentially cut costs.

Shareholders of Foundation Coal Holdings Inc. will receive 1.084 shares of the new company for each share held, or about $32.73 per share. That price is a premium of 41 percent over Foundation Coal's closing price Monday.

Alpha shareholders will own about 59 percent of the new business, which will be based in Abingdon. Foundation is currently based in Linthicum Heights, Md., just outside of Baltimore.

Michael Quillen, Alpha's chairman and CEO, would become chairman and Alpha's president, Kevin Crutchfield, would be chief executive officer. Kurt Kost, Foundation's president and chief operating officer, would become president of the combined company. James Roberts, Foundation's chairman and CEO, would be a member of the combined company's board of directors, which will consist of six directors from Alpha Natural Resources Inc. and four directors from Foundation.

Both boards approved the deal, which is targeted to close later this year.

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