Citing its plans to realign its business with an emphasis on gas production, CONSOL Energy (NYSE:CNX) announced today that it has signed a definitive agreement to sell its five West Virginia coal mines for an aggregate value of $3.5 billion to privately held Murray Energy. The deal includes 1.1 billion tons of coal reserves taken from CONSOL's Number 8 seam in Pittsburgh as well, according to CONSOL.
The sale calls for an upfront cash payment of $850 million due at closing, and future payments based on expected reserve royalties, water treatment payments, and tolling fees, which are expected to total approximately $184 million, according to CONSOL. Additionally, Murray Energy, the largest privately owned coal producer in the U.S., has agreed to assume CONSOL's liabilities, an estimated $2.4 billion consisting primarily of post-retirement obligations.
Murray Energy has also agreed to assume CONSOL's on-going pension trust liabilities, an estimated $33 million annually, CONSOL said in its statement.
Commenting on the transaction, CONSOL chairman and CEO J. Brett Harvey said, "the sale of these five mines -- assets that have long contributed to America's economic strength and our company's legacy -- was a very difficult decision for our team."
Murray Energy confirmed in its statement issued today that current employees of CONSOL's West Virginia coal operations will have "an opportunity for long term employment."
The deal is not subject to Murray Energy obtaining financing, and is expected to close by year-end 2013, subject to standard closing conditions. Assuming the sale closes by year-end, CONSOL said it expects to report a $1.3 billion pre-tax gain in 2013's Q4.
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