Arch Resources will merge with Consol Energy in an all-stock deal to create a North American coal mining giant valued at more than $5 billion.

There has been a lack of investment in new coal mines amid tight emission regulations, but the fossil fuel is expected to remain part of the energy mix for years to come, especially in countries such as India and China.

"We anticipate more than 67% of the company's pro forma volume would be exported to fast-growing Asian markets," Consol CEO James Brock said on a call with analysts.

"The company will virtually have no overlap in products and customers," Brock added.

Shares of Consol gained 4.4%, while those of Arch Resources rose 2.3%.

The combined company will have an export capacity of 25 million tons per annum across two shipping terminals.

The deal is expected to generate $110 million to $140 million of annual cost savings by six to 18 months following the close of the transaction, which is expected in the first quarter of 2025.

Consol will issue 1.326 of its common stock for each share of Arch Resources, or about $125.61 on a per-share basis, according to Reuters' calculations, as per the last close.

Arch stockholders will own about 45% of the combined company, with Consol shareholders owning the rest.

The new company will be called Core Natural Resources and will trade under a new ticker symbol that has yet to be disclosed.

Deal-making in the sector has gained momentum over the last one year as demand, especially for coking coal, remains strong.

Commodities trader Glencore acquired coal assets of Canada's Teck Resources earlier this year, while Anglo American is seeking buyers for its Australian metallurgical coal mines after rebuffing BHP's $49 billion takeover offer.

Comments