Alpha Natural Res. To Buy Foundation Coal For $2B

Coal miner Alpha Natural Resources Inc (ANR.N) on Tuesday agreed to buy smaller rival Foundation Coal Holdings Inc (FCL.N) for about $1.5 billion in stock, in a deal that would create the third-largest U.S. coal producer.
The $2 billion deal, which includes $530 million debt, values Foundation at $32.73 a share and is at a 41 percent premium to its Monday closing price. Foundation shares surged more than 27 percent in early trade on the New York Stock Exchange.
The combined company will operate 59 coal mines and 14 preparation plants across the United States with reserves of more than 2.3 billion tons of coal, Alpha Natural said.
"We're creating a true U.S. leader in the energy sector with balance, size and scale," said Michael Quillen, CEO of Alpha.
Coal prices rose in recent years on demand for power generation and steel production in China and other developing economies.
But prices fell later as demand slumped amid the economic downturn prompting many large coal miners, including Alpha, to comment that they were looking at acquisition opportunities in the sector.
DEAL DYNAMICS
Under the deal, Foundation stockholders will receive 1.084 shares of the new company for each share held, while each share of Alpha will automatically become one share of the combined company.
Alpha Natural expects the deal to add to adjusted earnings and cash flow earnings in 2010.
The total consideration consists of about 50 million shares of the new company's stock and assumes about $530 million of Foundation Coal's debt, Alpha Natural said.
The combined company will have a market capitalization of $3.5 billion and proforma 2008 revenue of $4.2 billion. Alpha Natural shareholders will own 59 percent of the combined company and Foundation shareholders will own the rest.
Upon closing of the deal, Alpha's current president Kevin Crutchfield will become chief executive officer of the combined company.
The deal, which is approved by both the companies, is expected to be completed later this year.
The combined company will retain the "Alpha" name and will continue to trade on the New York Stock Exchange under Alpha's current ticker symbol "ANR".