Whitesburg KY

Alpha completes takeover of rival Foundation Coal

Alpha Natural Resources has completed the takeover of rival Foundation Coal Holdings, winning shareholder approval of a deal that creates a national power out of two regional players even as the recession hammers energy demand.

Abingdon, Va.-based Alpha now has 6,200 employees and 61 mines in Wyoming, West Virginia, Kentucky, Pennsylvania and Virginia. And with 91 million tons of annual production, Alpha ranks as the nation’s third-largest coal mine operator behind St. Louisbased giants Peabody Energy and Arch Coal.

Enterprise Mining Company, which has extensive operations in Letcher County, is a subsidiary of Alpha.

Alpha announced the offer to buy Linthicum Heights, Md.- based Foundation in an all-stock deal worth $1.4 billion in May.

“We think we’ve created a nice coal company that will stand the test of time,” new Chief Executive Kevin Crutchfield said in an interview. Crutchfield moves up from president to replace CEO Mike Quillen, who becomes chairman of the combined company.

Alpha is billing the combined company as stronger and more balanced, with the financial strength and scale to compete in what has become a tough market for coal producers. Low demand for power and steel have hurt prices and demand.

Alpha now is expected to generate about $4.2 billion in annual revenue, will have about $400 million in cash and more than $1 billion in total liquidity. It also will control 2.3 billion tons of reserves.

Canonsburg, Pa.-based rival Consol Energy isn’t expecting the emergence of a bigger rival to change the competitive balance in Appalachia.

“I don’t,” Consol Chief Executive Brett Harvey told analysts when asked about the deal during a conference call last week. “I think they’ve just made a bigger company to compete with.”

Crutchfield said his initial focus will be on integrating the companies. That process may cost some jobs, though many people at Foundation’s headquarters will be offered positions at Alpha.

“There’s plenty of work for everybody to go around,” he said.

Alpha did not release a vote total, but the deal had to overcome opposition from its largest shareholder. Among other things, Duquesne Capital Management argued the deal would reduce Alpha’s financial flexibility.

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