OAO Severstal Agrees to Acquire PBS Coals for $1.3B
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OAO Severstal announced Friday that its mining division, Severstal Resources, intends to acquire the business of PBS Coals Corporation by way of an acquisition of Penfold Capital Acquisition Corporation following a business combination of PBS and Penfold for an all cash purchase price of C$8.30 per share, implying an enterprise value of US$1.3 billion.
PBS is engaged in the mining, processing and sale of metallurgical and thermal coal in Somerset County, Pennsylvania, U.S. PBS's operations are located in the Northern Appalachian Coal Fields, situated between Severstal's North American production centres, and have the capacity to produce over 4 million tonnes of metallurgical coal.
PBS's portfolio includes six underground and six surface mining operations. In the fiscal year ended March 31, 2008, PBS produced approximately 2.4 million clean tonnes of coal, including 1.5 million clean tonnes of coking coal. PBS has 133.5 million tonnes of in-place coal reserves and 228.3 million tonnes of in-place coal resources.
The announcement could be bullish for others in the coal sector. Market Vectors-Coal ETF (NYSE: KOL) could see upside as well as top players in the sector such as Peabody Energy (NYSE: BTU), CONSOL Energy (NYSE: CNX) or Arch Coal (NYSE: ACI).
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