My finance view

If there were any doubts about how Wall Street would respond to Patriot Coal Corp.’s agreement to buy central Appalachian rival Magnum Coal Co., they were quickly erased Thursday.

Patriot shares surged $7.85, or 17 percent, to close at a record $54.80 in trading on the New York Stock Exchange. The stock is up 71 percent since it began trading at $32 on Oct. 18.

Creve Coeur-based Patriot announced late Wednesday that it agreed to buy Magnum for $709 million in stock and debt. Magnum stockholders will receive 11.9 million newly issued Patriot shares. Patriot also will assume $150 million in debt.

The purchase, expected to close around mid-year, will nearly double the size of Patriot and make it the second-largest coal producer in the eastern U.S., just five months after it was spun off from St. Louis-based Peabody Energy Corp. Only Massey Energy Co. is larger in central Appalachia.
"It came down to buying good assets at the right price," said Jeremy Sussman, a coal analyst at Natixis Bleichroeder Inc. in New York.

When the acquisition is complete, Patriot will generate revenue of more than $2 billion and sell between 40 million and 45 million tons of coal a year, Patriot Chief Financial Officer Mark N no teletrack payday loans. Schroeder said Thursday during a conference call with analysts and investors.

And because many of Magnum’s mines are contiguous to Patriot’s operations in southern West Virginia, the purchase will create efficiencies that should help the company take advantage of a robust coal market.

"We see synergies in a number of areas, including operating cost savings, enhanced brokerage and trading operations, the ability to increase net coal production and sales, and in the administrative functions," Schroeder said.

Magnum, based in Charleston, W.Va., has 1,700 employees and owns 12 mines and seven preparation plants. The company was formed in late 2005 and consists mainly of assets acquired from Arch Coal, also based in Creve Coeur.

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

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