US Coal Miners Arch and Consol to Combine Into $5.2 Billion Giant

If two coal companies are pressed together, is the result a diamond — or is it just “$110 million to $140 million of annual cost and operational synergies”?

Arch Resources and Consol Energy are about to find out. The two US-based companies announced plans for an all-stock merger of equals Wednesday to create a new $5.2 billion coal giant called Core Natural Resources.

Form a Coal-ition

The energy sector has seen a flurry of deals this year, including Diamondback Energy’s proposed merger with Endeavor Energy Resources and ConocoPhillips’ proposed acquisition of Marathon Oil. While it’s mostly been in oil and gas, the coal sector hasn’t gotten the coal-d shoulder: In June, Glencore closed its acquisition of coal assets from Canada’s Teck Resources, and Anglo American will take bids on its Australian metallurgical coal mines next month after rejecting a $49 billion takeover offer by BHP.

Once seen as on the wane, coal got a second life among investors after energy markets were thrown into disarray by the war in Ukraine. Electricity demand has kept soaring globally, adding to favorable short- to medium-term conditions for the Arch-Consol tie-up:

• S&P Global Commodity Insights estimated that, in 2023, the US was set to take 70% (133,000 megawatts) of its coal power capacity offline by 2035. But this year, that’s fallen to about 105,000 megawatts.
• Pittsburgh metro-based Consol shareholders will own 55% of the new company and shareholders in St. Louis-based Arch will own 45% — Consol shares, up 0.86% Wednesday, were looked upon more favorably than Arch shares, which fell nearly 2%.

Bad Santa: In what might be a stocking stuffed with coal for the coal business, China — which accounts for half of global coal demand, according to the International Energy Agency — announced Wednesday that it’s investing $31 billion to build 11 new nuclear plants in the next five years.