Louisville, Kentucky — Murray Energy, the largest privately owned coal company in the US, will pay approximately $1.4 billion for a controlling interest in Foresight Energy in a deal that combines two thermal coal producers with a major presence in the high-sulfur Illinois Basin as well as operations in several other coal basins, the companies said Sunday night.
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Together, the two companies produce almost 90 million short tons of coal annually -- more than 30 million st in Illinois, or nearly 10% of the country's total output.
In return for a cash payment of $1.395 billion, Ohio-based Murray will receive about 50% of Foresight, headquartered in St. Louis, "including all of the outstanding subordinated units," and access to certain other coal handling, transportation and transloading facilities, the companies said in a statement.
Murray said it plans to finance the transaction with additional indebtedness. The Foresight purchase comes barely a year after Murray bought five underground thermal coal mines in West Virginia from Consol Energy for $3.25 billion.
Foresight founder and billionaire Christopher Cline will remain a significant investor in the company and stay on the board of directors.
Murray founder Robert E. Murray called the merger "truly a transformative event for our companies and the entire world coal industry."
The newly combined companies, he added, "will provide a strategic platform for further growth of our businesses. The structure and financial benefits of this transformative transaction will facilitate the reduction of our debt and further acquisitions and will provide additional operating flexibility."
For several years, Robert Murray has accused the Obama administration and especially its Environmental Protection Agency of waging a "war of coal" that has led to an industry retrenchment, particularly in Central Appalachia. By comparison, the IB is doing relatively well, with production on the rise in Illinois, largely a result of Foresight's three high-producing longwall mines and single continuous miner operation.
"In this extremely distressed coal marketplace," Murray said, "a coal mining company must strive to be the lowest-cost producer in any sourcing region. Foresight Energy has continued to be the low-cost producer in the Illinois Basin, with a focus on safely producing high quality, high heat coal, strategically located near low-cost transportation."
Cline noted in a statement that both he and Robert Murray started their careers as coal miners, "and we know how to run safe, efficient and low-cost mining operations. We think that we will do even better together by sharing best practices and exploiting obvious synergies on cost."
Murray operates 12 mines, including the New Future and New Era underground mines near Galatia in Saline County, Illinois, and is the largest coal producer in Ohio as well as the former Consol mines in West Virginia and in the Uintah Basin in Utah.