Peabody Energy Corporation (NYSE: BTU) has entered into an agreement to purchase high-grade steelmaking coal mines from Anglo American (JO:AGLJ) plc, marking a significant expansion of its metallurgical coal operations. The $2.32 billion deal is set to close by mid-2025, pending regulatory and other customary approvals.
The acquisition encompasses four metallurgical coal mines in Australia's Bowen Basin, known for its premium steelmaking coal. These mines, which include Moranbah North, Grosvenor, Aquila, and Capcoal, are expected to bolster Peabody's production to an estimated 21-22 million tons by 2026, up from 7.4 million tons in 2024.
BMO Capital Markets analyst Katja Jancic called the deal "transformative".
"The transaction is expected to be completed in mid-2025 and will be transformative as it will reweigh Peabody's portfolio to met coal, thus supporting improved profitability and potential multiple re-rate," Jancic stated.
Peabody's President and CEO, Jim Grech, emphasized the strategic alignment and accretive nature of the transaction, highlighting the potential for $100 million in annual synergies and improved margins. The company projects significant demand growth for metallurgical coal in Asian markets, where the acquired assets are strategically located.
The deal involves an upfront cash payment of $1,695 million, deferred payments of $625 million over four years, and up to $1 billion in contingent payments based on favorable future events. Additionally, Anglo American will receive $455 million from the sale of Dawson Mine to PT Bukit Makmur Mandiri Utama in a related transaction.
Peabody has secured a bridge facility commitment to finance the acquisition and plans to pursue permanent financing to maintain a targeted debt-to-EBITDA ratio. CFO Mark Spurbeck indicated that the acquisition would allow for continued shareholder returns and investment in the company's sustainability initiatives, which include developing renewable energy projects and setting new long-term emissions reduction targets.
The transaction is subject to clearance of pre-emption rights by minority partners of the assets and other standard closing conditions. Peabody also anticipates integrating the new assets into its portfolio to enhance shareholder value.
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