Arch Resources, Inc. (“Arch”) (NYSE: ARCH) and Consol Energy Inc. (“Consol”) (NYSE: CEIX) have announced a definitive agreement to merge and create Core Natural Resources, a prominent North American natural resource company. The companies expect the merger to bring together two best-in-sector operating platforms with a world-class portfolio of high-quality, low-cost, long-lived longwall coal mining assets and strong distribution networks.
The combined company is expected to have a market capitalization of approximately $5.2 billion and generate substantial free cash flow, supported by a strong balance sheet and a pro forma positive net cash position. The merger is anticipated to yield $110 million to $140 million of annual cost and operational synergies, primarily from logistics optimization, coal blending, and procurement and SG&A efficiencies.
In 2023, the pro forma revenues for Core Natural Resources were approximately $5.7 billion and adjusted EBITDA was approximately $1.8 billion, excluding expected synergies. Pro forma for 2023, the company would have generated approximately $1.4 billion of free cash flow and had a net cash position of approximately $260 million as of June 30, 2024.
The merger is expected to create a leading North American coal export business with approximately 25 million tons per annum (mtpa) of export capacity, and the potential to optimize expanded export capacity and logistics capabilities to enhance reliable, efficient coal delivery to global customers. Core Natural Resources will also benefit from Consol’s growing seaborne thermal business focused on industrial applications and Arch’s significant exposure to attractive global metallurgical coal markets.
Furthermore, the all-stock merger is anticipated to be accretive to free cash flow for both Arch and Consol in the first full year following the close, and is expected to deliver substantial capital returns, including potential share buybacks and a modest sustaining dividend.
The combined company will be led by a proven leadership team, with Mr. Brock serving as Executive Chairman and Mr. Lang as CEO. The board of directors will comprise eight members, with four directors selected by each company. Core Natural Resources will be headquartered in Canonsburg, Pennsylvania, with a presence in St. Louis.
The merger is subject to approval by both companies’ stockholders, regulatory approvals, and the satisfaction of other customary closing conditions, with an expected closing by the end of the first quarter of 2025. In connection with the agreement, the Consol board declared a dividend of $0.25 per share, payable in cash on September 13, 2024, to holders of record of Consol common stock as of August 30, 2024. Share repurchases for both Arch and Consol will be suspended until the transaction is completed.
As a result of these announcements, the company's shares have moved 2.2% on the market, and are now trading at a price of $96.84. For more information, read the company's full 8-K submission here.
