Mining Company Buys Smaller Coal Producer
CLEVELAND — The iron and coal mining company Cleveland-Cliffs, said Wednesday that it would buy a rival coal producer, Alpha Natural Resources, for nearly $10 billion in cash and stock in a move to bolster its role as a supplier to the global steel industry.
Skip to next paragraph The boards of both Cleveland-Cliffs and Alpha Natural, which is based in Abingdon, Va., have approved the deal, in which Alpha shareholders will receive 0.95 Cleveland-Cliffs shares ($105.89 based on the stock’s Tuesday closing price) and $22.23 in cash for each share held.
The $128.12 combined price represents a 35 percent premium to Alpha’s Tuesday close of $94.92. Based on the company’s 70.3 million outstanding shares at April 23, the deal is valued at $9.01 billion. In a statement, the companies valued the transaction at $10 billion.
Cleveland-Cliffs will pay $1.7 billion in cash and issue 71 million new shares of common stock to finance the deal, it said. JPMorgan Chase Bank is providing an underwriting commitment for up to $1.9 billion in financing. After the deal closes, Alpha stockholders will own about 40 percent of the combined company, and Cleveland-Cliffs shareholders will own 60 percent.
The combined company will be named Cliffs Natural Resources, and own nine iron ore operations and more than 60 coal mines in North and South America and Australia.
The chief executive of Cleveland-Cliffs, Joseph A. Carrabba, will remain in that post, and the head of Alpha Natural, Michael J. Quillen, will become a non-executive vice chairman.
The transaction is expected to close by the end of the year, subject to shareholder and regulatory approvals. The combined company will have 8,900 workers and expected 2009 revenue of $10 billion, as demand from the steel industry grows. Cliffs Natural Resources would have a reserve base of about 1 billion tons of iron ore and 1 billion tons of metallurgical and steam coal.
The company expects annual sales volume of more than 30 million tons of iron ore, nearly 18 million tons of metallurgical coal, making it one of the largest suppliers to the world‘s steel industry. It also expects to ship 17 million tons of steam coal, which is used by utilities to generate electricity.
The iron ore business will operate from Cleveland and the coal business from Abingdon, Va.
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