CHARLESTON, W.Va. -- Confirming growing industry speculation about such a deal, CONSOL Energy announced Monday that it is selling its five large underground coal mines in northern West Virginia to Murray Energy.
The $3.5 billion transaction frees CONSOL to focus more on its increasing interest in the region's growing natural gas market, and roughly doubles the size of Ohio-based Murray's workforce and annual coal production.
In separate statements, Murray Energy and CONSOL said they had entered into a purchase agreement that includes CONSOL's McElroy, Shoemaker, Blacksville, Loveridge and Robinson Run mining complexes.
The mines, using advanced longwall machines, are located in Marion, Marshall and Monongalia counties, and employ about 2,800 hourly workers who are represented by the United Mine Workers union. They are five of the top six underground mines in West Virginia, with nearly 30 million tons of combined production in 2012, according to federal data.
The deal also includes coal reserves, related river transportation and dock facilities and other assets.
"No company has developed a better legacy with its employees, with its customers, with the financial markets, with the regulatory agencies, or with the public in general, over many decades than has CONSOL and Consolidation Coal," said Robert E. Murray, president and CEO of Murray Energy. "Murray Energy intends to preserve this well-earned legacy."
In a separate statement, CONSOL said that Murray would pay $850 million in cash at closing and make future payments of nearly $184 million in value resulting from the retention of royalties on certain reserves, water treatment payments, and tolling fees at CONSOL's Baltimore Terminal.
CONSOL said that Murray would also acquire $2.4 billion of CONSOL balance sheet liabilities, including $2.1 billion for retirement benefits.
CONSOL described the deal as a "major shift" that divests it of significant coal assets and allows it to focus more on natural gas production.
"CONSOL needs to change with the marketplace and that's why we're doing what we're doing," CONSOL CEO Brett Harvey told reporters in a conference call. "It's a major pivot toward value for our shareholders."
The deal increases Murray's number of direct employees from 3,300 to 7,100, the company said. Annual production would increase from 30.1 million tons to 58.6 million tons, Murray said.
"The combined companies will allow Murray Energy to better serve our customers with reliable and low cost coal supplies at accurate qualities," Murray said. "This is truly a momentous time for the combined employees of Murray Energy Corporation, and for our company."
Already, Murray Energy operated six longwall mining systems, with major operations in Ohio, Illinois, Kentucky and Utah, and was ranked as the largest privately held coal producer in the country.
"With our expertise, we will be able to efficiently operate the acquired Consolidation Coal mines and provide their employees with an opportunity for long term employment," said Robert Moore, Murray Energy's executive vice president.