Arch Resources and Consol Energy have agreed to an all-stock merger of equals to establish Core Natural Resources, a North American natural resource company with an estimated market capitalisation of $5.2bn.
According to the terms of the definitive agreement, stockholders of Arch Resources will receive 1.326 shares of Consol Energy common stock for each share of Arch Resources common stock they hold.
Following the closing of the deal, Arch Resources stockholders will hold approximately 45% of Core Natural Resources, while Consol Energy stockholders will own around 55% on a fully diluted basis.
Arch Resources CEO Paul Lang said: “This merger will join two proven leadership teams and best-in-sector operating platforms to establish a premier North American coal producer with worldwide reach and world-class mining and logistics capabilities.
“Core Natural Resources will enjoy the benefits of Consol’s growing seaborne thermal business focused on industrial applications coupled with Arch’s significant exposure to attractive global metallurgical coal markets.”
To be traded as a public company, Core Natural Resources is expected to emerge as a leading producer and exporter of high-quality, low-cost coal, with a diverse portfolio ranging from metallurgical to high calorific value thermal coals.
The newly formed entity will operate 11 mines across six states. It will include one of North America’s largest, lowest-cost, and highest calorific value thermal coal mining complexes along with extensive and cost-effective metallurgical coal mine portfolios in the US.
Core Natural Resources also will have an ownership interest in around 25 million tonnes per annum (tpa) of export coal capacity across two marine export terminals on the US Eastern seaboard.
Besides, the combined company will have strategic connectivity to ports on the West Coast and the Gulf of Mexico.
The merger is anticipated to deliver $110m to $140m in annual cost and operational synergies within six to 18 months after the transaction is completed.
Core Natural Resources will be headquartered in Pennsylvania. It will be led by Lang as the CEO Consol Energy chairman and CEO Jimmy Brock will serve as executive chairman of the company’s board of directors.
Brock said: “Our assets are highly complementary, resulting in increased diversification across coal types, end uses, and geographies.
“In addition, Core Natural Resources is expected to have a strong balance sheet, ample liquidity, and robust free cash flow to deliver industry-leading capital returns.”
Last year, Arch Resources and Consol Energy collectively sold around 101 million tonnes of coal to customers in steelmaking, industrial, and power-generation sectors.
Subject to approval by both companies’ stockholders, regulatory approvals, and other customary conditions, the proposed merger is anticipated to be completed by the end of Q1 2025.
For the transaction, Perella Weinberg Partners acts as exclusive financial adviser to Arch Resources while Latham & Watkins and Gibson, Dunn & Crutcher serve as legal counsel.
Moelis & Company is the exclusive financial adviser to Consol Energy, with Wachtell, Lipton, Rosen & Katz and McGuireWoods serving as legal counsel.
