May 19, 2024

DealBook: Arch Coal in $3.4 Billion Deal to Acquire I.C.G.

Arch Coal said on Monday that it would buy the International Coal Group in a cash deal worth $3.4 billion that will create one of the world’s largest coal producers.

The combined company would have annual revenue of $4.3 billion on shipments of 179 million tons of coal — both thermal and steel-producing varieties — and employ about 7,400 people. It will also have reserves of 5.5 million tons, the second-biggest in the United States coal industry.

Steven F. Leer, chairman and chief executive of Arch, said the transaction would “extend our operating portfolio into every major U.S. coal-producing basin, and solidify our position as one of the industry’s lowest-cost producers.”

Earlier this year, Arch Coal lost out in the bidding for Massey Energy, the coal operator that had been troubled since an explosion last year at the Upper Big Branch mine in West Virigina. Alpha Natural Resources won Massey in a $7.1 billion cash and stock deal.

Arch is offering $14.60 for every International Coal share, 32 above I.C.G.’s closing stock price on Friday.

Both boards have approved the tender offer, which is set to commence in mid-May, and 17 percent of I.C.G. shares are already committed to the deal, which is expected to close in the second quarter.

Arch says it expects the deal will begin adding to its earnings per share by next year, with annual savings of up to $80 million.

Arch has obtained a bridge loan from Morgan Stanley and PNC, and plans to raise permanent financing by issuing debt and equity.

Arch was advised by Morgan Stanley and the law firm Simpson Thacher Bartlett, while International Coal was advised by UBS and the Jones Day law firm.

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