The U.S. District Court has concluded its review of the joint venture combining Peabody and Arch Resources’ Power River Basin and Colorado assets and is supporting the Federal Trade Commission’s (FTC) decision to block the formation of the joint venture.
“We are deeply disappointed with the court’s decision as the intense all-fuels competition is clearly apparent to us,” Peabody President and CEO Glenn Kellow said. “Our focus now is on continuing to be the low-cost PRB coal provider to best compete against natural gas and subsidized renewables.”
The FTC said the transaction will eliminate competition between Peabody and Arch Coal, the two major competitors in the market for thermal coal in the Southern Powder River Basin, and the two largest coal-mining companies in the United States.
Following the court decision, Arch said while it disagrees with the verdict, it would terminate the proposed joint venture. Arch said aggressively driving forward with its strategic pivot toward steel and metallurgical markets and simultaneously intensifying its pursuit of strategic alternatives for its thermal assets is the best course of action for the company.
Arch and Peabody have agreed to discontinue legal efforts, given the significant investment of time, resources and expense that would be required to conduct an appeal.
“In the wake of today’s decision, we will be intensifying our pursuit of strategic alternatives for our thermal assets, including, among other things, potential divestiture, while evaluating opportunities to shrink the operational footprint at those mines, reduce their asset retirement obligations, and establish self-funding mechanisms to address those long-term liabilities,” Arch CEO Paul A. Lang said. “In the meantime, we will maintain our sharp focus on aligning our thermal production rates with declining domestic thermal coal demand; adjusting our thermal operating plans in order to minimize future cash requirements; and streamlining our entire organizational structure to reflect our long-term strategic direction.”
The transaction was announced in June 2019 and would combine Peabody’s North Antelope Rochelle Mine (NARM) and Arch’s Black Thunder Mine, which share a property line of more than seven miles. Additional assets include the Caballo, Rawhide and Coal Creek mines in Wyoming along with the West Elk and Twentymile mines in Colorado. Ownership of the joint venture would have been structured with Peabody owning 66.5% and Arch owning 33.5%. The joint venture was expected to realize annual synergies of $120 million over an initial 10-year period.