By Lisa Kerner
Charlotte, N.C., July 16 - Cleveland-Cliffs Inc. agreed to acquire Alpha Natural Resources, Inc. in a cash and stock transaction valued at approximately $10 billion.
Under the companies' definitive merger agreement, Alpha Natural Resources stockholders will receive 0.95 shares of Cleveland-Cliffs common stock and $22.23 in cash for a total value of $128.12 per Alpha Natural Resources share, based on the closing price of Cleveland-Cliffs' stock on July 15.
The per-share price is a 35% premium to Alpha Natural Resources' closing stock price on July 15.
Total consideration comprises $1.7 billion in cash and about 71 million new shares of Cleveland-Cliffs common stock, a joint company news release said.
JPMorgan Chase Bank, NA is providing an underwriting commitment for up to $1.9 billion to fund the transaction.
The transaction is expected to close by the end of 2008, subject to approval by Cleveland-Cliffs and Alpha Natural Resources shareholders, as well as other customary closing conditions.
According to the release, the combined company, Cliffs Natural Resources, will become one of the largest U.S. mining companies with a portfolio that includes nine iron ore facilities and more than 60 coal mines located across North America, South America and Australia.
Once the merger is complete, Alpha Natural Resources stockholders will own about 40% of the combined company and Cleveland-Cliffs shareholders will own about 60%.
Joseph Carrabba, Cleveland-Cliffs' chairman, president and chief executive officer, will become chairman and CEO of the combined company, and Alpha Natural Resources' chairman and CEO, Michael Quillen, will become a non-executive vice chairman.
Cleveland-Cliffs' board of directors will be expanded by two seats to be filled by two current Alpha Natural Resources directors, Quillen and Glenn Eisenberg, according to the release.
Kevin Crutchfield, president of Alpha Natural Resources, will become president of the combined company's coal businesses.
Donald Gallagher, Cleveland-Cliffs president, North American business unit, will become president of the combined company's iron ore businesses.
Cliffs Natural Resources will be based in Cleveland. The iron ore business will operate from Cleveland and the coal business from Abingdon, Va.
Upon the transaction's close, Cliffs Natural Resources would have estimated combined pro forma 2008 revenue of nearly $6.5 billion and EBITDA of $1.9 billion. Estimated 2009 revenue would reach $10 billion with estimated EBITDA of $4.7 billion, the release noted.
Cliffs Natural Resources expects to realize annual synergies of at least $200 million beginning in 2010.
"Together, Alpha Natural Resources and Cleveland-Cliffs will have the size, the management depth and the mining expertise to compete on the global stage as demand for raw materials continues to increase around the world," Quillen said in the release.
"Cliffs Natural Resources will be positioned as a diversified natural resources company with significant holdings in a variety of important minerals," Carrabba added.
J.P. Morgan Securities Inc. advised Cleveland-Cliffs, while Alpha Natural Resources was advised by Citi.
Cleveland-Cliffs, an international mining company, produces iron ore pellets in North America and supplies metallurgical coal to the steelmaking industry. The company is based in Cleveland.
Alpha Natural Resources, located in Abingdon, Va., supplies Appalachian coal to the steel industry, electric utilities and other industries.
| Acquirer: | Cleveland-Cliffs Inc.
|
| Target: | Alpha Natural Resources, Inc.
|
| Announcement date: | July 16
|
| Price per share: | 0.95 Cleveland-Cliffs shares plus $22.23 in cash
|
| Transaction total: | $10 billion
|
| Expected closing: | By the end of 2008
|
| Stock price of acquirer: | NYSE: CLF: $111.46 on July 15
|
| Stock price of target: | NYSE: ANR: $94.92 on July 15
|
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.
