WILMINGTON, Del. (Reuters) - Contura Energy Inc and Alpha Natural Resources Holdings Inc said on Monday they agreed to merge, creating the largest U.S. producer of metallurgical (met) coal, used in steelmaking, and reuniting the two businesses that were split following a 2015 bankruptcy.
The deal comes as investors look for consolidation in an industry that is recovering from a deep downturn in 2015 and 2016, when several coal producers filed for bankruptcy in the wake of cheap natural gas and stricter regulations.
Under terms of the all-stock deal, Alpha shareholders will end up owning 46.5 percent of the merged entity. The two companies said they sold a combined 12.6 million tons of metallurgical coal in 2017, vaulting the merged company ahead of Coronado Resources Ltd of Vancouver.
The merged company will own 1 billion tons of coal reserves, according to a securities filing.
The deal gives Alpha and Contura increased scale and financial muscle, and the merged company expects to list its common stock on the New York Stock Exchange when the deal closes, giving it capital for more acquisitions.
Contura’s stock, which currently trades over the counter, was unchanged at $66.50 per share in afternoon trading, giving the company a market capitalization of about $685 million, according to Eikon.
Alpha’s reorganization under Chapter 11 bankruptcy significantly reduced the company’s debt, which had totaled more than $7 billion when it filed.
Contura owned mines in Wyoming that produced more thermal coal, while Alpha owned mines centered in Appalachia.
Last year, Contura sold its Wyoming mines and Alpha reduced its clean-up obligations for idled mines.
The merged company will have mines concentrated in West Virginia and southwest Virginia and a large coal export terminal on Virginia’s coast to serve the global market for met coal.
The combination will produce cost savings of up to $50 million per year, according to a statement.
The combined company will be led by Kevin Crutchfield, who took over as chief executive officer of Alpha in 2009 and took on that role at Contura after the bankruptcy. Alpha’s current chairman and CEO, David Stetson, will join the board of the combined company.
Prices of coal have rallied since the bankruptcies of Alpha and other coal companies such as Peabody Energy Corp and Arch Coal Inc, thanks to strong demand from Asia. For the first time in years, up to 90 percent of global coal miners are profitable.
Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio