“The sale of these five mines — assets that have long contributed to America’s economic strength and our company’s legacy — was a very difficult decision for our team,” said Brett Harvey, chairman and CEO, CONSOL Energy. “The employees at these mines are among the safest and most productive miners anywhere in the world. In the end, we concluded that the time had come to sell these mature assets to ownership whose strategic direction is more aligned with those mines.”
The sale effectively doubles the production capacity of Murray Energy and halves the production capacity of CONSOL Energy. Murray Energy currently operates six underground longwall mining systems and 23 continuous mining units. Consolidation Coal operates an equal number of each. In 2012, CONSOL Energy was ranked No. 5 in the U.S. with 56.5 million tons and Murray Energy was ranked eighth with 29.3 million tons. The two companies would swap positions in that ranking of U.S. coal producers.
“No company has developed a better legacy with its employees, with its customers, with the financial markets, with the regulatory agencies, or with the public in general, over many decades, than CONSOL Energy and Consolidation Coal,” said Robert E. Murray, chairman, president and CEO of Murray Energy. “Murray Energy intends to preserve this well-earned legacy.”
Of the $3.5 billion, CONSOL Energy will receive $850 million in cash to be paid at the closing and future payments expected to total nearly $184 million in value resulting from the retention of a royalty on select reserves, certain water treatment payments and tolling fees at CONSOL Energy’s Baltimore Terminal.
In addition to the mines, miners and equipment, Murray Energy will acquire $2.4 billion of CONSOL Energy’s post-retirement liabilities, which includes a $2.1 billion acquisition of other post-retirement benefit plans. Other acquired liabilities include $105 million of workers’ compensation, $61 million of coal workers’ pneumoconiosis, $13 million of long-term disability, and $149 million of environmental.
Additionally, Murray Energy is acquiring CONSOL Energy’s United Mine Workers of America (UMWA) 1974 Pension Trust Obligations. CONSOL Energy, under contract with the UMWA, currently services the obligation through a $5.50 per hour contribution, or approximately $33 million per year. If this payment stream were to be capitalized, it would have a present value of approximately $941 million.
Deutsche Bank Securities acted as financial advisor to Murray Energy. Goldman Sachs & Co. and Deutsche Bank are providing committed financing to Murray Energy in connection with the transaction; Goldman Sachs is leading the financing. Kirkland & Ellis LLP acted as counsel to Murray Energy.
