Peabody to Acquire Tier 1 Australian Metallurgical Coal Assets from Anglo American

PR Newswire

ST. LOUIS, Nov. 25, 2024

   -- Transforms Peabody into a leading global seaborne metallurgical coal 
      producer with Tier 1 mines1 near the world's strongest steel markets 
 
   -- Transaction represents an attractive 3.1x times enterprise-value-to-2026 
      EBITDA multiple 
 
   -- Delivers significant cash flow accretion to Peabody across all time 
      periods 
 
   -- Positions Peabody to capture substantial synergies and enhance margins 
 
   -- Enables continuing capital allocation balance between shareholder returns 
      and reinvestment in the portfolio 
 
   -- Company to host conference call today, Nov. 25, 2024, at 11 a.m. EST 

ST. LOUIS, Nov. 25, 2024 /PRNewswire/ -- Peabody $(BTU)$ today announced it has agreed to acquire world-class steelmaking coal assets from Anglo American plc in a transaction that meaningfully accelerates Peabody's strategy to reweight its global coal portfolio toward seaborne metallurgical coal. The transaction is expected to close mid-2025, subject to customary closing conditions.

In consideration for the transaction:

   -- Peabody has agreed to pay cash of $2,320 million, comprised of cash of 
      $1,695 million at closing and deferred payments of $625 million payable 
      in four annual installments commencing on the first anniversary of the 
      completion date. 
 
   -- Peabody has also agreed to further contingent payments of up to $1.0 
      billion, subject to potential favorable future events. 
 
   -- Proceeds to Anglo American would also include $455 million made possible 
      by the acquisition of Dawson Mine by PT Bukit Makmur Mandiri Utama in a 
      back-to-back transaction. 

"This transformative transaction presents a rare opportunity for Peabody to acquire premier steelmaking coal assets at a compelling valuation as we reweight our portfolio toward seaborne metallurgical coal," Peabody President and Chief Executive Officer Jim Grech said. "The transaction is strategically aligned, immediately accretive and highly synergistic, positioning us to better serve the best metallurgical coal demand centers in the world. This transaction gives us a strong foundation to position the company for long-term success."

"We are delighted to agree to the sale of this portfolio of world-class steelmaking coal assets to Peabody, and we look forward to working together with the Peabody team and with our workforce, local communities, government, customers and partners to ensure a successful transition," Anglo American Chief Executive Duncan Wanblad added.

The acquisition includes four metallurgical coal mines -- Moranbah North, Grosvenor, Aquila, and Capcoal -- located in Australia's Bowen Basin, which is widely recognized for the world's highest-quality steelmaking coal. Approximately 80 percent of the mines' output is hard coking coal. The mines are complementary to Peabody's existing Australian platform, including Centurion Mine, and are expected to produce approximately 11.3 million tons of primarily hard coking coal in 2026. The acquired mines have an average mine life greater than 20 years with 306 million tons of marketable reserves and an additional 1.7 billion tons of coal resources.(2)

The acquisition is expected to transform Peabody's metallurgical coal segment, increasing metallurgical coal production from an estimated 7.4 million tons in 2024 to an expected 21 -- 22 million tons in 2026.

Strategic and Financial Benefits

Peabody believes the acquisition demonstrates multiple compelling strategic and financial benefits, as the transaction:

   -- Increases exposure to premium hard coking coal and key high-growth 
      markets: With a greatly expanded Australian metallurgical coal portfolio, 
      Peabody will be poised to meet increasing demand in Asian markets, which 
      represent the entire growth in global steel demand over the past decade 
      and the vast majority of all projected growth in metallurgical coal 
      demand through 2050. The acquired assets' coal quality and proximity to 
      key markets in Asia provides substantial opportunities to better serve 
      customers. 
 
   -- Creates opportunity to capture substantial synergies: Peabody expects 
      significant estimated synergy opportunities of approximately $100 million 
      per year to be realized through efficiencies from office rationalization, 
      selling, general & administrative savings, and marketing opportunities. 
 
   -- Enhances margins and through-the-cycle performance: The acquired assets' 
      coal quality will upgrade Peabody's metallurgical coal platform and is 
      superior to the peer average. Assuming consensus hard coking coal prices 
      of $225 per metric ton, Peabody anticipates Adjusted EBITDA margins3 of 
      $65 to $70 per ton on the anticipated 11.3 million tons of 2026 coal 
      sales attributable to the acquisition. 
 
   -- Bolsters Peabody's attractive financial profile: The company expects the 
      transaction to be meaningfully accretive to cash flows across all time 
      periods on a levered operating cash flow less CapEx basis. The 
      transaction implies an attractive 3.1x times enterprise-value-to-2026 
      EBITDA multiple. The company also believes the increased exposure to 
      metallurgical coal creates the potential for a favorable re-rating of the 
      company's valuation, given stronger multiples for metallurgical coal 
      producers with long-lived assets. 
 
   -- Accelerates company's sustainability and emission target ambitions: 
      Peabody continues to strengthen its sustainability through a number of 
      activities, including reweighting its portfolio toward steelmaking coal, 
      joint venture initiatives to develop solar power and battery storage on 
      former mine lands, and fully funding final reclamation obligations. 
      Additionally, after achieving its first reduction targets for Scope 1 and 
      2 emissions, the company's Board of Directors intends to establish new 
      long-term targets including the newly acquired assets in the coming 
      months. 

"This value-enhancing acquisition builds upon actions we have taken in recent years to strengthen our balance sheet and expand shareholder returns. Subsequent to the transaction closing, we anticipate continuing our shareholder return program based on available free cash flow, while a portion of cash flows will be used to fund the transaction during the deferred payment period," Peabody Chief Financial Officer Mark Spurbeck said. "Once we fully integrate the acquired metallurgical coal assets into our seaborne portfolio, we will have an even stronger platform to provide significant value upside to our shareholders."

Additional Transaction Details

Peabody's acquisition is contingent on regulatory approvals, clearance of pre-emption rights by minority partners of the assets, and other customary closing conditions.

The company has secured a bridge facility commitment to finance the acquisition. The company intends to obtain permanent financing in lieu of borrowing under the bridge facility and targets a debt-to-EBITDA ratio ceiling of approximately 1.5x.

The transaction agreement provides for an upfront cash payment of $1,695 million, as well as $625 million of deferred cash consideration to be paid over a four-year period(4) , $450 million of contingent consideration based on the successful restart of Grosvenor(5) , and up to $550 million of contingent consideration based on a revenue sharing agreement over a five-year period(6) . All referenced transaction components exclude the Dawson Mine, which Indonesia's PT Bukit Makmur Mandiri Utama (BUMA) has agreed to acquire for total consideration of $455 million ($355 million upfront cash and $100 million in four annual installments commencing on the first anniversary of the Dawson transaction completion date), subject to pre-emption rights and other customary closing conditions.

"Peabody appreciates the shared values of Anglo American across safety, sustainability, productivity and social license matters, and we look forward to welcoming the experienced employees related to these assets to the Peabody team," Mr. Grech said. "We also look forward to again teaming up with the leading global partners who share not only ownership interests in these mines but also our view of the long-term value of these assets."

Conference Call and Webcast

Peabody will host a conference call and webcast today, November 25, 2024 at 11 a.m. EST to discuss the acquisition.

The conference call will be available via live webcast on the investor relations section of Peabody's website at www.peabodyenergy.com, or directly at the following web address: Webcast. Concurrent with this release, Peabody has issued a presentation on the transaction that can be found on the investor section of www.peabodyenergy.com.

The conference call can also be accessed by dialing 1-833-816-1387 within the U.S. and 1-412-317-0480 for all other locations. An archive of the webcast will be available for at least 30 days after the event.

Advisors

Moelis & Company LLC and MA Moelis Australia are serving as financial advisors to Peabody, and Jefferies is leading a financier consortium for the transaction. Jones Day is serving as legal counsel to Peabody, and Wachtell, Lipton, Rosen & Katz is serving as counsel to the company's Board of Directors.

About Peabody

Peabody (NYSE: BTU) is a leading coal producer, providing essential products for the production of affordable, reliable energy and steel. Our commitment to sustainability underpins everything we do and shapes our strategy for the future. For further information, visit www.PeabodyEnergy.com.

Contact:

Vic Svec

ir@peabodyenergy.com

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