August 5, 2008

Cleveland-Cliffs Inc. To Buy Alpha Natural Resources for 4.80 Times Revenue

By Anonymous

The Deal: Cleveland-Cliffs Inc. has agreed to acquire Alpha Natural Resources Inc. in a cash and stock transaction. Under the terms of the agreement, each share of Alpha Natural will be exchanged for $22.23 in cash and 0.95 shares of Cleveland-Cliffs. Based on recent closing prices, the deal values Alpha Natural at $128.12 per share, a premium of about 35 percent over the company's share price prior to the deal announcement. After the deal closes, current holders of Alpha Natural will own around 40 percent of the combined company, which will be renamed Cliffs Natural Resources. The companies expect the transaction to close by the end of 2008. Discussion: Alpha Natural Resources produces steam and metallurgical coal at 45 underground mines and 25 surface mines, most of which are located in central and northern Appalachia. The company produces about 25 million tons of coal annually and also purchases coal from other mining companies.

Cleveland-Cliffs is the largest producer of iron ore pellets in North America. The company owns or holds stakes in six iron ore properties, including Northshore Mining and Empire Iron. The company's mines produce more than 35 million tons of iron ore pellets each year, representing more than 45% of North American production.

The combined company will have estimated 2008 sales of nearly $6.5 billion. The companies expect revenues to reach $10 billion in 2009.

Copyright NVST, Inc. Jul 21, 2008

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