Patriot Coal Announces Agreement to Acquire Magnum Coal Company
02 April 2008 - 11:52PM
PR Newswire (US)
ST. LOUIS, April 2, 2008 /PRNewswire-FirstCall/ -- 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 Central
Appalachia, operating 12 mines and 7 preparation plants. Magnum
sold 18.4 million tons of coal in 2007 and has over 600 million
tons of proven and probable reserves in southern West Virginia.
"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 U.S.
overall." 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. Important Information for
Stockholders The Company will file a proxy statement/prospectus
with the Securities and Exchange Commission (the "SEC") in
connection with the proposed issuance of Company common stock in
the transaction with Magnum. Investors and stockholders are urged
to read the proxy statement/prospectus when it becomes available
and any other relevant documents filed with the SEC because they
will contain important information about the proposed issuance.
Investors and stockholders may obtain these documents free of
charge at the website maintained by the SEC at http://www.sec.gov/.
In addition, documents filed with the SEC by the Company are
available free of charge by contacting investor relations by phone
at (314) 275-3680, in writing to Janine A. Orf, Director of
Investor Relations, or by email to . The final proxy
statement/prospectus will be mailed to stockholders. This
communication shall not constitute an offer to sell or the
solicitation of an offer to buy securities, nor shall there be any
sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such jurisdiction. The
Company and its directors and executive officers and other members
of management and employees may be deemed to be participants in the
solicitation of proxies from the stockholders of the Company in
connection with the proposed issuance. Information about the
Company's directors and executive officers is set forth in the
Company's Annual Report on Form 10-K for the year ended December
31, 2007 filed with the SEC on March 14, 2008 and in the
Information Statement filed as Exhibit 99.1 to the Report on Form
8-K filed by the Company with the SEC on October 24, 2007.
Additional information regarding the interests of such potential
participants will be included in the proxy statement/prospectus and
the other relevant documents filed with the SEC when they become
available. Forward Looking Statements Certain statements in this
press release are forward-looking as defined in the Private
Securities Litigation Reform Act of 1995. These statements involve
certain risks and uncertainties that may be beyond our control and
may cause our actual future results to differ materially from
expectations. We do not undertake to update our forward-looking
statements. Factors that could affect our results include, but are
not limited to: failure to obtain Company stockholder approval of
the proposed issuance; failure to obtain, delays in obtaining or
adverse conditions contained in any required regulatory or other
approvals; availability and cost of financing; failure to
consummate or delay in consummating the transaction for other
reasons; changes in laws or regulations; changes in general
economic conditions, including coal and power market conditions;
the outcome of commercial negotiations involving sales contracts or
other transactions; the Company's dependence on Peabody Energy
Corporation in the near future; geologic, equipment and operational
risks associated with mining; supplier and contract miner
performance and the availability and cost of key equipment and
commodities; the Company's ability to replace coal reserves; labor
availability and relations; availability and costs of
transportation; weather patterns affecting energy demand;
legislative and regulatory developments; risks associated with
environmental laws and compliance; the outcome of pending or future
litigation; and the availability and costs of competing energy
resources. The Company undertakes no obligation (and expressly
disclaims any such obligation) to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. For additional information concerning
factors that could cause actual results to materially differ from
those projected herein, please refer to the Company's Form 10-K and
8-K reports. DATASOURCE: Patriot Coal Corporation CONTACT: Janine
Orf of Patriot Coal Corporation, +1-314-275-3680 Web site:
http://www.patriotcoal.com/
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