Peabody's $2.32 Billion Deal for Anglo American's Coal Assets Described as 'Transformative'

image

Peabody's $2.32 Billion Deal for Anglo American's Coal Assets Described as 'Transformative'

Peabody Energy Corporation (NYSE: BTU) has entered into an agreement to acquire coal mines from Anglo American plc for high-quality steel production, aiming to significantly expand its metallurgical coal operations. The $2.32 billion deal is expected to close by mid-2025, pending regulatory and other customary approvals.

The acquisition includes four metallurgical coal mines located in Australia's Bowen Basin, known for their premium coking coal: Moranbah North, Grosvenor, Aquila, and Capcoal. These mines are expected to boost Peabody's production from 7.4 million tons in 2024 to an estimated 21-22 million tons by 2026.

BMO Capital Markets analyst Katja Jancic described the deal as "transformational." Jancic stated, "The transaction is expected to close by mid-2025 and will be transformational for Peabody as it reallocates its portfolio towards metallurgical coal, thereby supporting improved profitability and potential multiple re-rating."

Peabody’s President and CEO Jim Grech emphasized the strategic alignment and value-adding nature of the transaction, highlighting a potential annual synergy of $100 million and improved margins. The company anticipates significant growth in demand for metallurgical coal in Asia, where the acquired assets are strategically located.

The agreement includes $1.695 billion in cash upfront, $625 million in deferred payments over four years, and up to $1 billion in conditional payments tied to future positive events. Additionally, Anglo American will receive $455 million from the sale of the Dawson Mine to PT Bukit Makmur Mandiri Utama as part of a related transaction.

Peabody has secured a bridge loan commitment to finance the acquisition and will seek permanent financing to maintain its targeted debt-to-EBITDA ratio. CFO Mark Spurbeck noted that the acquisition would enable the company to invest in its sustainability initiatives, such as developing renewable energy projects and setting new long-term emissions reduction targets, while sustaining returns to shareholders.

The transaction is subject to the approval of preemptive rights of minority partners in the assets and other standard closing conditions. Peabody also plans to integrate the new assets into its portfolio to enhance shareholder value.