Bowie Resource Partners will become the US' largest Western bituminous coal producer following a deal with Peabody Energy, according to the company.
The Louisville, Kentucky-based company expects the $358 million acquisition to nearly double its annual output to 25 million st/year, which is expected to generate revenues of $1 billion annually.
The company currently produces roughly 12.6 million st of coal annually from three mines in Utah and one in Colorado.
"These acquisitions fit the vision and model that were the genesis of BRP, as we continue to buck the industry trend with long-term contractual partnerships with our customers and secure margins in our niche," said John Siegel, Bowie's executive chairman, in a statement released late Friday.
Peabody agreed to sell its El Segundo and Lee Ranch mines in New Mexico and the Twentymile Mine in Colorado, which have combined coal reserves of roughly 330 million st.
"The El Segundo and Twentymile mining complexes have exemplary safety and productivity records, long-term relationships with domestic customers and superior reserve quality that combine to render this an accretive and synergistic acquisition for us that will create economies of scale and lower" costs, Siegel added.
As part of the deal, an unnamed private equity fund will buy out Bowie's existing partner, Galena US Holdings, an affiliate of Trafigura, but Trafigura will remain the exclusive export marketing agent for Bowie.
The deal could help Bowie "capture both greater cost and marketing efficiencies," and "further strengthen the value proposition for Bowie," said FBR equity analyst Lucas Pipes in a research note issued Monday.
Pipes added that the deal is "largely a strategic move" for Peabody, enabling it to unlock capital and focus on its core regions: the Powder River Basin, Illinois Basin and Australia.
The deal also allows Peabody to reduce its self-bonding requirements by more than $300 million as a result of the transaction, noted Stifel analyst Paul Forward in a research note issued Monday.
The transaction is expected to close before the end of the first quarter of 2016.
