Arclight Capital Partners has completed its sale of Magnum Coal Co. to Patriot Coal Corp. (NYSE: PCX) for nearly $709 million. The deal creates the second-largest coal producer in central
ORIGINAL PRESS RELEASE
Patriot Coal Corporation (NYSE: PCX) today announced that it has signed an agreement to acquire Magnum Coal Company (“Magnum”). Magnum is one of the largest and lowest-cost coal producers in
“This transaction fits squarely with Patriot's strategy of growing through synergistic, accretive acquisitions, particularly in the fragmented Central Appalachian region. Magnum further strengthens our metallurgical coal position and expands our thermal coal presence in the important CAPP region, provides both current production and valuable reserves for future expansion, and is expected to be highly accretive within the first year. Importantly, Magnum shares with Patriot a strong emphasis on the safety of its miners,” said Patriot President and Chief Executive Officer Richard M. Whiting. “Magnum's significant presence and expertise in surface mining will further diversify Patriot's extensive asset base. With the addition of Magnum, Patriot will be positioned as the second largest coal producer in CAPP and the seventh largest in the
Under the terms of the agreement, Magnum stockholders will receive approximately 11.9 million shares of newly-issued Patriot Coal common stock. Additionally, Patriot will assume net debt estimated at $150 million, bringing the total acquisition price to approximately $709 million based on the April 2, 2008 closing price of Patriot common stock. While bridge financing has been arranged, the Company expects to have permanent financing in place by closing. The acquisition is subject to certain regulatory approvals, approval by Patriot stockholders and customary closing conditions. The proposed transaction is expected to be completed around mid-year.
On a pro forma basis, the combination of Patriot and Magnum would have sold more than 40 million tons in 2007 and generated revenues of just under $2.0 billion. Proven and probable reserves on a combined basis will exceed 1.9 billion tons. The combined assets will provide Patriot a more balanced production mix, with approximately 70% underground and 30% surface mining. With a strong base of low-sulfur thermal coal and growing production of metallurgical coal, Magnum's properties are in close proximity to Patriot's Central Appalachian properties, thereby enabling cost-effective optimization of the combined assets.
“The transaction is expected to provide substantial commercial and operational synergies,” said Whiting. “It will create economies of scale, enhance our product line, grow our customer base, provide more transportation options, and accelerate our brokerage and trading activities. We look forward to completing this transaction as soon as possible and welcoming Magnum's 1,700 highly-skilled employees to the Patriot team.”
“We believe this presents a unique opportunity to consolidate two significant, complementary coal companies, achieving the benefits of scale and diversity that we believe are critical to further industry consolidation and long-term success in the coal sector. The combination of talent from these two management teams will create a premier organization to manage and grow the enterprise,” said Robb E. Turner, Chairman of Magnum and Senior Partner of ArcLight Capital Partners, LLC, majority stockholder of Magnum. “We invest opportunistically across the entire energy industry and are particularly excited about the prospect of expanding our participation in the coal sector via an investment in Patriot.” Following the closing, ArcLight will own approximately 16% of Patriot shares, and Magnum's other stockholders will own a combined 15% interest.
Lehman Brothers acted as financial advisor to Patriot and Citi acted as financial advisor to Magnum for this transaction.
Conference Call
Management will hold a conference call to discuss the proposed acquisition on April 3, 2008 at 10:00 a.m. Central Daylight Time. The conference call can be accessed by dialing 800-398-9398, or through the Patriot Coal website at http://www.patriotcoal.com. International callers can dial 612-332-0335 to access the conference call. A replay of the conference call will be available on the company's website and also by telephone, at 800-475-6701 for domestic callers or 320-365-3844 for international callers, passcode 918325.
About Patriot Coal
Patriot Coal Corporation (the “Company”) is a leading producer and marketer of coal in the eastern United States, with ten company-operated mines and numerous contractor-operated mines in Appalachia and the Illinois Basin. The company ships to electric utilities, industrial users and metallurgical coal customers, and controls approximately 1.3 billion tons of proven and probable coal reserves. The company's common stock trades on the New York Stock Exchange under the symbol PCX.
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