Peabody announces that it has signed a definitive agreement to purchase the Shoal Creek metallurgical coal mine from private coal producer Drummond Company, Inc. for $400 million. Shoal Creek is located on the Black Warrior River in Central Alabama and serves Asian and European steel mills with high-vol A coking coal.
The transaction involves the purchase of the mine, preparation plant and supporting assets, and excludes legacy liabilities other than reclamation. The purchase price is subject to customary working capital adjustments. Closing is expected prior to the end of 2018 and is subject to regulatory approvals, certain conditions precedent, including negotiation by Drummond of a collective bargaining agreement with the union-represented workforce, and other customary conditions.
"Peabody has consistently outlined our intention to upgrade our metallurgical coal platform and make strategic investments using a strict set of filters. We believe the purchase of the well-capitalized and high-quality Shoal Creek Mine meets these filters, offers major logistical advantages and represents an opportunity to create significant value," said Peabody President and Chief Executive Officer Glenn Kellow. "The acquisition allows us to expand volumes and margins from our met coal platform, enhances our scale, and offers complementary products to customers. We applaud the Drummond team for developing a high-quality operation, and we look forward to advancing that reputation for excellence."
Peabody believes the acquisition is consistent with the company's previously stated investment filters: maintain financial strength; fit within the company's strategic focus areas of the PRB, ILB, seaborne met and seaborne thermal; provide expected returns above Peabody's weighted average cost of capital with a reasonable payback period; bring about tangible synergies; and create value for the company's shareholders.