Coal companies Consol Energy and Arch Resources see shares rally on $5 billion all-stock merger deal

By Steve Gelsi

Mining companies target up to $140 million in annual cost savings, with a focus on exports

Shares of Consol Energy Inc. and Arch Resources Inc. rallied Wednesday after the two coal producers announced plans to merge in an all-stock deal valued at about $5 billion.

The companies, which will be renamed Core Natural Resources after the merger, are projecting $110 million to $140 million in annual cost savings from efficiencies gained by the deal within 18 months of closing, which is expected by early 2025.

Wall Street applauded the deal with an 8.5% rise in Consol Energy's stock price (CEIX), while Arch Resources' stock (ARCH) moved up by 6%.

Arch stockholders will get 1.326 shares of Consol common stock for each share of Arch common stock.

Based on Tuesday's closing price of $94.73 a share for Consol's stock, the deal values Arch's stock at $125.61 a share.

Arch Resources' stock closed at $126.74 a share on Tuesday.

Upon the completion of the merger, Consol Energy shareholders will own 55% of the combined company, while Arch Resources shareholders will account for 45%.

Consol Energy is the larger of the two, with a market capitalization of $2.78 billion, while Arch Resources is currently valued at about $2.29 billion.

The two companies are worth about $5.1 billion based on Tuesday's closing stock price, with $5.7 billion in combined annual revenue.

While use of thermal coal for electricity has been falling in the U.S., demand for metallurgic coal for making steel continues to rise globally.

"New steel will be essential in supporting the world's growing population, ongoing economic development, continued urbanization, and the build-out of a low-carbon economy," the companies said.

The merger will grow North American logistics and export operations aimed at a "growing global customer base," the companies said.

Core Natural Resources will own two marine export terminals on the U.S. Eastern seaboard, with connections to ports on the West Coast and the Gulf of Mexico.

"The potential to optimize this expanded export capacity and logistics capabilities is expected to enhance reliable, efficient coal delivery to global customers," the companies said.

Prior to Wednesday's trading, Consol Energy's stock had fallen 5.8% in 2024, while Arch Resources' stock was down by 23.6% this year.

-Steve Gelsi

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08-21-24 1019ET

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