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Patriot Coal Corp., the company spun off from Peabody Energy Corp. five months ago, said it has agreed to purchase rival Magnum Coal Co. for $709 million in a deal that would create the second-largest coal producer in central Appalachia.

Together, Patriot and privately held Magnum sold more than 40 million tons of coal in 2007, generated almost $2 billion in revenue and own 2 billion tons of reserves, the companies said Wednesday in a statement.

Patriot Chief Executive Richard M. Whiting said Magnum’s assets represent a good strategic and geographic fit and will add to earnings in the first year.

"This transaction fits squarely with Patriot’s strategy of growing through synergistic, accretive acquisitions, particularly in the fragmented central Appalachian region," Whiting said in the statement.

Creve Coeur-based Patriot is using its fast-rising stock as currency. Shares of the company have risen 47 percent since they began trading at $32 on Oct. 18 as investors respond to increasing demand for coal to run power plants and make steel.

Magnum stockholders will receive 11.9 million newly issued Patriot shares, which closed Wednesday at $46.95 on the New York Stock Exchange. Patriot also will assume $150 million in debt.

The transaction, which had been rumored in the coal industry, is subject to approval by regulators and Patriot shareholders and is expected to close around mid-year.

Magnum’s majority owner, Boston-based ArcLight Capital Partners LLC, will own 16 percent of Patriot under terms of the sale, and other Magnum shareholders will own 15 percent.

"We believe this presents a unique opportunity to consolidate two significant, complementary coal companies, achieving the benefits of scale and diversity that we believe are critical to … long-term success in the coal sector," Robb E same day payday loans. Turner, Magnum’s chairman and managing partner of ArcLight, said in the statement.

Magnum, which has 1,700 employees, is based in Charleston, W.Va. It owns 17 mines and seven preparation plants.

The company was formed in late 2005 by ArcLight and Arch Coal Inc.

Creve Coeur-based Arch, the nation’s No. 2 coal producer, intended to exchange some mining operations for a minority stake in the new company, but ultimately sold the assets for cash to rid itself of millions of dollars in retiree health care costs and environmental liabilities.

jtomich@post-dispatch.com | 314-340-8320

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