Abingdon-Based Coal Company Bought
Posted on: Saturday, 19 July 2008, 03:00 CDT
The buying spree by Cleveland-Cliffs continued yesterday with a nearly $10 billion acquisition of Alpha Natural Resources Inc., based in Abingdon.
The deal would broaden the one-time Midwest company's international reach as well as its exposure to a global steel industry clamoring to fuel its mills.
Its biggest acquisition to date, the cash-and stock deal would create a company with the largest reserves of iron ore and metallurgical coal in the U.S.
The company would be named Cliffs Natural Resources, and own nine iron-ore facilities and more than 60 coal mines in North and South America and Australia.
A global consolidation of the commodities industry has begun to accelerate. The Cleveland-Cliffs deal comes on the heels of major acquisitions by Luxembourg-based ArcelorMittal, the world's largest steelmaker, and Korean steel giant Posco.
The boards of both Cleveland-based Cleveland-Cliffs and Alpha Natural Resources approved the deal, in which Alpha shareholders will receive 0.95 Cleveland-Cliffs shares and $22.23 in cash for each share held.
Cleveland-Cliffs shares tumbled nearly 7 percent, or $7.44, to $104.02. Alpha's stock's jumped 10.5 percent, or $10.01, to $104.93.
Based on Cleveland-Cliff's closing price Tuesday, Alpha shareholders will receive $128.12 per share, a 35 percent premium on 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. After the deal closes, Alpha stockholders would own about 40 percent of the combined company, and Cleveland-Cliffs shareholders would own 60 percent.
Cleveland-Cliffs Chief Executive Joseph Carrabba will be CEO of the new company, and Alpha Chairman and CEO Michael Quillen will become nonexecutive vice chairman.
The combined company will have 8,900 workers and expected 2009 revenue of $10 billion. 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 and 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, used by utilities to generate electricity.
The iron ore business will operate from Cleveland and the coal business from Abingdon.
ILLUSTRATION: PHOTO
Originally published by The Associated Press.
(c) 2008 Richmond Times - Dispatch. Provided by ProQuest Information and Learning. All rights Reserved.
Source: Richmond Times - Dispatch
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