Contura Energy and Alpha Natural Resources have agreed to merge in an all-stock deal, creating United States’ largest producer of metallurgical coal. The merger brings two companies that split during the settlement of Alpha’s 2015 bankruptcy back together.
The newly merged Contura Energy will continue to be led by Contura’s existing management team, some of whom, including CEO Kevin Crutchfield were with Alpha before the split. Alpha’s current Chairman and CEO, David Stetson, will resign, taking a seat on Contura’s board.
The newly merged Contura, which sold a combined 12.6 million tons of metallurgical coal and 13.8 million tons of thermal coal in 2017, will own one billion tons of coal reserves. The company said in a release it plans to list its common stock on the New York Stock Exchange when the deal closes, in a bid to raise capital for further acquisitions. Both companies currently trade on the over-the-counter market.
Under the terms of the agreement, Alpha shareholders will receive 0.4071 Contura common shares for each ANR, Inc. Class C-1 share and each Alpha Natural Resources Holdings, Inc. common share they own, representing approximately 46.5 percent ownership in the merged entity.
The resulting combination is expected to generate cost synergies in the range of $30 million to $50 million annually, including through coal blending optimization as well as purchasing, operating, administrative, and capital allocation efficiencies.
“While this transaction would probably not have been possible even a year ago, resurgent global coal markets, a tightened production profile by way of recent asset divestments made independently by both Alpha and Contura, and resulting potential cost synergies together provide an exciting opportunity for value creation through combining our respective operational portfolios,” said Crutchfield. “The Contura team is excited to join forces with Alpha’s set of highly competitive coal operations and unify some of the best coal miners in the world under one organization.”
“We believe this transaction makes great strategic sense that benefits our long-term stakeholders,” added Stetson. “The combined organization will have a stronger balance sheet, greater capabilities and a longer reserve life. More importantly, the merger will align two companies that share a steadfast commitment to safety and Running Right.”
“This transaction will leverage the prior transformative work accomplished by both Contura and Alpha management teams to materially improve each entity’s operational, financial and risk profiles,” said Contura Board Chairman Neale Trangucci. “Achieving such a turnaround in less than two years is no small task. Our board is proud of and appreciates the diligent work of employees and management of both organizations, and we are very excited about the future of the new combined company.”
