Arch Resources (ARCH) M&A Announcement summary

Deal rationale and strategic fit

• Merger creates Core Natural Resources, a premier North American natural resource company with global reach, combining complementary assets, minimal customer/product overlap, and expanded diversification across coal types, end uses, and geographies.

• The combined entity will be a leading producer and exporter of high-quality, low-cost met and thermal coals, serving global steel, industrial, and power generation customers, with ~12 Mtpa of metallurgical coal and over 25 Mtpa of high calorific value thermal coal.

• Enhanced logistics and export capabilities include ownership interests in two East Coast terminals and access to West Coast and Gulf of Mexico ports, supporting significant export capacity to fast-growing Asian markets.

• Both companies have pivoted from domestic thermal to seaborne markets, aligning long-term strategies and balancing seaborne industrial business with exposure to higher-value met coals.

• The merger leverages strong safety, environmental, and social stewardship records, aiming to deliver superior value to stakeholders and enable robust adjusted EBITDA and free cash flow generation.

Financial terms and conditions

• All-stock merger of equals; Arch stockholders receive 1.326 shares of CONSOL for each Arch share, resulting in pro forma ownership of 55% CONSOL stockholders and 45% Arch stockholders.

• Pro forma 2023 revenues of $5.7 billion, adjusted EBITDA of $1.8 billion, and free cash flow of $1.4 billion, excluding synergies.

• Combined market capitalization of approximately $5.2 billion and enterprise value of up to $5.5 billion.

• The transaction is expected to be tax-free for U.S. federal income tax purposes for both companies' stockholders.

• Both companies may pay up to $0.25 per share in quarterly dividends until closing; share repurchases are suspended until completion.

Synergies and expected cost savings

• $110–$140 million in annual cost and operational synergies expected within 6–18 months post-close, mainly from logistics optimization, product blending, procurement, and SG&A efficiencies.

• About one-third of synergies from port capacity and product blending, two-thirds from procurement, SG&A, and elimination of duplicative costs.

• Additional upside from best practices, technological advances, and elimination of duplicative public company costs.

• The transaction is expected to be accretive to free cash flow in the first full year after closing.

• Pro forma 2023 free cash flow would have been ~$1.4 billion, with a net cash position of ~$260 million as of June 30, 2024.