Good things come to those who wait. That might have worked well as an ad slogan for ketchup back in the 1980s, but when it comes to striking transformational business deals, good things come to those who go out and make it happen.
For Appalachian coal miner Alpha Natural Resources
On the heels of Arch Coal's
With massive thermal coal reserves and prolific production in Wyoming's Powder River Basin, Foundation Coal Holdings not only tips Alpha's pro forma production profile convincingly in the direction of thermal coal (86% of pro forma 2008 sales), but also significantly expands Alpha's geographical footprint and economy of scale. The combined company will rank third among domestic producers behind Peabody Energy
As a bonus, Alpha will benefit from Foundation's favorably priced supply contracts that I highlighted back in February … when Foundation posted a 425% increase in net earnings. Alpha expects the deal to become accretive in 2010 with $45 million or more in synergies. Despite my conviction that the coal sector at large has more pain on the near-term horizon, I find this particular deal to be the right move at the right time for both of these intrepid miners.