|Arch and Peabody to combine U.S. PRB and Colorado assets in highly synergistic joint venture to unlock approximately $820 million in synergies|
The joint venture is expected to unlock synergies with a pre-tax net present value of approximately
"We are excited about this transaction's potential to enhance the value of Arch's top-tier thermal coal assets," said Arch Chief Executive Officer
"The Peabody/Arch joint venture is an extraordinary example of industrial logic targeted to strengthen the competitive position of our products and create significant value for multiple stakeholders in a low-cost combination with exceptional physical synergies," said Peabody President and Chief Executive Officer
Governance of the joint venture will consist of a five-member board of managers appointed by Arch and Peabody. Each party will have voting rights in proportion to its ownership percentages, with certain items requiring supermajority approval. As the operator, Peabody will manage all activities including the marketing of coal. Arch and Peabody will share profits, capital requirements and cash distributions of the joint venture in proportion to ownership percentages.
Among other assets, the joint venture will combine two productive and adjacent U.S. coal mines –
Aggregated synergies are expected to enable the joint venture to significantly reduce costs well beyond what each company could achieve alone. A lower cost structure enables coal to better compete against other energy sources for electricity generation and create value. Expected substantial synergies include, among others:
Underpinning the combination, Peabody has the lowest cost position among major
The combination of assets from two recognized companies is expected to advance continued responsible mining and reclamation for decades to come, benefiting all stakeholders.
"In addition to enhancing the competitiveness of our western thermal coal platform, this move represents an excellent fit with our well-defined strategy for long-term value creation and growth," Eaves said. "While we expect our thermal coal assets to contribute significantly to our overall financial performance well into the future, we plan to focus our future growth and all of our projected growth capital on our core coking coal segment. Earlier this year, we announced plans to develop a second, world-class, High-Vol A longwall mine on the Leer reserves in northern
At the same time, Arch plans to drive forward with its highly successful capital return program. Since launching the program in
Arch and Peabody will continue to operate the assets independently until closing of the transaction. Closing is subject to regulatory approval and the satisfaction of customary closing conditions. Upon closing, Arch and Peabody will each contribute its active
In 2018, on a combined basis, the assets shipped 206.0 million tons of coal. The assets are operated by a workforce of approximately 3,300, with combined proven and probable reserves totaling 3.4 billion tons as of
Participants can access Peabody's call at PeabodyEnergy.com or using the following dial-in numbers:
All other international participants, please contact Peabody Investor Relations at (314) 342-7900 prior to the call to receive your dial-in number.
Participants can access Arch's call at archcoal.com or using the following dial-in numbers:
Peabody is the leading global pure-play coal company and a member of the Fortune 500, serving power and steel customers in more than 25 countries on six continents. The company offers significant scale, high-quality assets, and diversity in geography and products. Peabody is guided by seven core values: safety, customer focus, leadership, people, excellence, integrity and sustainability. For further information, visit PeabodyEnergy.com.
Forward-Looking Statements: This press release contains "forward-looking statements" – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "aims," "anticipates," "intends," "plans," "believes," "seeks," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from our ability to complete the joint venture transaction in a timely manner, including obtaining regulatory approvals and satisfying other closing conditions; from our ability to achieve the expected synergies from the joint venture; from our ability to successfully integrate the operations of certain mines in the joint venture; from our emergence from Chapter 11 bankruptcy protection; from changes in the demand for our coal by the domestic electric generation and steel industries; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from competition within our industry and with producers of competing energy sources; from our ability to successfully acquire or develop coal reserves; from operational, geological, permit, labor and weather-related factors; from the Tax Cuts and Jobs Act and other tax reforms; from the effects of foreign and domestic trade policies, actions or disputes; from fluctuations in the amount of cash we generate from operations, which could impact, among other things, our ability to pay dividends or repurchase shares in accordance with our announced capital allocation plan; from our ability to successfully integrate the operations that we acquire; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For a description of some of the risks and uncertainties that may affect our future results, you should see the risk factors described from time to time in the reports we file with the
1 Synergies of approximately
2 Average combined synergies of approximately
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