Billed as a merger of equals, Pittsburgh-based coal giant Consol Energy is acquiring St. Louis-based coal giant Arch Resources in an all-stock deal. The combination is valued at a market capitalization of about $5.2 billion.
The new firm – Core Natural Resources – will be based in Canonsburg, Pa., southwest of Pittsburgh where Consol is now headquartered. Some residual operations will “maintain a presence in St. Louis,” according to a joint news release. Consol CEO Jimmy Brock, 67, will become the executive chairman of the Core board while Arch CEO Paul Lang, 60, will be Core’s new chief executive officer.
Under the agreement, Arch shareholders will get 1.326 shares of Consol for each Arch share they own. Arch shareholders will end up with 45% of Core, with Consol shareholders owning 55%.
In the 2024 second quarter, Consol sold 5.6 million tons of coal, while Arch sold 2.1 million tons (2 million tons of that metallurgical coal). The Pittsburgh Post-Gazette reported, “The companies together sold approximately 101 million tons of coal in 2023 to steelmaking, industrial and power-generation customers.”
Both companies are major exporters of coal, shipping primarily through Baltimore. Their exports were slowed by the destruction of the Francis Scott Key bridge across Baltimore Harbor in March, when it was struck by the Singapore-registered container ship MV Dali.
Consol is the oldest continuing coal company in the U.S. In 1860, several small operations in Allegany County, Maryland, merged “consolidated to create the Consolidation Coal Company”. Operations were delayed until the end of the Civil War in 1864.
According to the Consol collection at the University of Pittsburgh library, “The company expanded rapidly in the early twentieth century through the purchase of substantial tracts in the coal fields of Pennsylvania, West Virginia, and Kentucky as well as docks and distribution facilities in the Great Lakes region. By 1927, Consol was the nation’s largest producer of bituminous coal.
“Following a merger with the Pittsburgh Coal Company in 1945, the company pursued a policy of acquiring companies which afforded opportunities for greater diversification while selling off unprofitable lines.” The new company became the “Pittsburgh Consolidation Coal Company.”
After a series of complex mergers, acquisitions, and restructurings, in 1999, Consol Energy stock began trading on the New York Stock Exchange as “CNX.” Most of Consol’s production is east of the Mississippi River.
Arch is the second largest U.S. coal company, behind Peabody Energy, also headquartered in St. Louis. Arch Resources was Arch Coal for most of its life, beginning in 1997 with the merger of publicly-traded Ashland Coal and privately-held Arch Mineral Corp., becoming the leading producer of low-sulfur coal in the eastern U.S.
The company quickly shifted its sights to the western U.S., buying Atlantic Richfield’s coal interests, primarily the huge Black Thunder and Coal Creek mines in Wyoming’s Powder River Basin, plus mines in Colorado and Utah. In 2009, Arch bought Rio Tinto’s Powder River Basin Jacobs Ranch mine, adjacent to Black Thunder, for a reported $761 million.
In January 2016, Arch Coal filed for Chapter 11 bankruptcy protection to reduce its heavy debt load of some $4.5 billion. The company emerged from bankruptcy in October 2016. In 2020, the company changed its name to Arch Resources.
In other coal industry news, Houston hedge fund Thomist Capital Wednesday (Aug. 21) announced it has bought a 9.96% share of Peabody Energy, which operates the North Antelope Rochelle, Rawhide, and Caballo mines in the Powder River. According to Cowboy State Daily, Thomist said in its filing that it “wants Peabody to use the $1.46 billion in cash on its balance sheet to buy back shares and unlock value in Wyoming’s coal heartland in northeastern Wyoming.”
“The pendulum has absolutely swung back toward coal.” — Lucas Pipes, B. Riley Securities
Lucas Pipes, an analyst at B. Riley Securities, told the Wall Street Journal, “The pendulum has absolutely swung back toward coal. Coal prices have been very robust and Ukraine has been a bit of a wake-up call, so investors have a different attitude toward coal today than 2018 in terms of [environmental, social and corporate-governance] considerations.”
The Journal reported, “Commodity giant Glencore this month said it would hang on to its coal unit, which it had enlarged by acquiring coal assets from Teck Resources, after initially planning to spin it off. Shareholders wanted the company to keep the business because it generates “huge amounts of cash” and because they think coal will continue to have a role in the energy transition, Glencore’s chief executive said.”
–Kennedy Maize