Deal to create third largest coal company

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Abingdon-based coal pro­ducer Alpha Natural Resources Inc. now has a shot at becoming Virginia’s next Fortune 500 company, thanks to its proposed $2 billion, all-stock acquisition of Foundation Coal Holdings Inc.

The deal would make Alpha the third largest coal company in the U.S. and give the company access to less expensive and more varied types of coal reserves in Wyoming’s Powder River Basin. Together, the two companies operate 59 coal mines and 14 preparation plants. Alpha had 19 mines in Virginia at the end of 2008.

“Because of our size and scale, we’re probably going to be able to do bigger deals than we could have done with just Alpha,” says Ted Pile, vice president of communications and corporate affairs for Alpha. “And we’re not going to sit still. We have some interesting prospects ahead of us because we can either continue to grow through mergers and acquisitions or, with the combination of both companies, there’s a substantial pipeline of potential internal growth projects where we can develop reserves that we own or control. So we have a real penchant for growth.”

The move will also be good for Virginia, Pile says. Alpha’s higher profile will enhance Virginia’s image as a major coal player, even though coal production has been on a steady decline in the state and Central Appalachia. There also will be an economic impact, as the company scales up its headquarters operation in Abingdon, Pile says. Alpha currently employs 130 people in Abingdon. “There will probably be more employment opportunities here,” he says.

Alpha and Foundation Holdings, which was based just outside of Baltimore, sell to energy utilities and the steel industry. The transaction, which valued Foundation stock at a premium of $32.73 a share and required the assumption of $530 million in Foundation debt, would give Alpha stockholders approximately 59 percent of the new company.

Despite the recession’s dampening effect on demand for electrical generation and steel and major losses among coal producers, Alpha reported $41 million in profits in the first quarter, a 61 percent increase over its quarterly report from the previous year.

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