May 13--ABINGDON, Va. -- A $2 billion merger announced Tuesday will place Alpha Natural Resources as the third-largest coal producer in the nation -- and in a strong position to weather industry uncertainty, company executives said.

The all-stock deal, which includes debt reduction, gives shareholders of the Linthicum Heights, Md.-based Foundation Coal Holdings Inc. 41 percent of the combined company, which will keep the Alpha name and keep its headquarters here.

"We've been preparing for this day for a long time," said Kevin Crutchfield, the president of Alpha who will serve as chief executive officer of the combined company. "This is, for us, a diversification strategy."

Crutchfield said that in acquiring Foundation, Alpha quadruples its coal production and expands its holdings, now based largely in the Central Appalachian region, to include northern Appalachia and Wyoming's Powder River Basin.

And because the self-financed transaction is taking place through an exchange of stock and payment of debt, the company's balance sheet will be just as strong after the merger as before, Crutchfield said. The merger also improves the company's position as federal government action adds uncertainty to future mining permits in this region and as Congress debates carbon tax legislation aimed at reducing climate change.

Stock prices for Alpha closed Tuesday at $27.06 on the New York Stock Exchange. Foundation's closed at $28.06.

The deal, unanimously approved by the boards of both companies, is still subject to stockholder approval later this year. Both companies said they expect that approval, and to close the deal this year.

Under the terms of the transaction, each share of Foundation will become 1.084 shares of the combined company.

In 2008, an announced $10 billion merger in which Ohio-based Cleveland-Cliffs Inc. planned to buy Alpha fell through after a single large stockholder, a hedge fund, opposed the deal. That merger would have positioned Alpha, which produces metallurgical coal, as part of the largest supplier to the global steel industry.

Tuesday's merger grows and diversifies Alpha's coal business.

"It makes us the most geographically diverse coal mining company in the U.S. with the addition of what Alpha had and then the addition of Foundation, especially with our mines in the" Powder River Basin, said Rick Nida, spokesman for Foundation. "It's bigger in size and it's bigger in scope, and that will provide an opportunity for employees, for growth... . We think the long-term future for coal is very positive."

Michael Quillen, currently the chairman and CEO at Alpha, will become chairman of the combined company. Foundation president and CEO Kurt Kost will become president.

Crutchfield will serve as CEO.

Together, the companies operate 59 coal mines and 14 preparation plants and employ more than 6,500 people.

Crutchfield said the merger will likely mean more jobs here -- though the details of how the companies will be integrated have yet to be worked out.

"Given that Abingdon will remain the headquarters, it's not inconceivable that we will need to increase our staff here," Crutchfield said. "I think it's a foregone conclusion that we'll end up expanding our footprint at our corporate headquarters here in Abingdon over the next couple years as a result of the merger."

Once the merger and integration are complete, he said, continuing strategic growth will be in Alpha's future.

dmccown@bristolnews.com| (276) 791-0701

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