Murray Energy and Foresight Reserves LP announced April 7 that they have entered into a new definitive agreement, for a transaction whereby Murray Energy is expected to acquire a significant economic interest in Foresight Energy GP LLC and Foresight Energy LP.
The previous agreement under which Murray Energy was expected to acquire interests in Foresight Energy has been terminated. Following the closing, Christopher Cline, the founder of Foresight Energy, will maintain a 66% voting interest in Foresight Energy GP and an approximate 36% economic interest in Foresight Energy LP and will remain actively involved as chairman of the Board of Directors of Foresight Energy GP. In addition, Cline will join the board of directors of Murray Energy upon consummation of the transaction. Robert “Bob’ Murray will remain the chairman, president and chief executive officer of Murray Energy, a company that he founded.
Murray Energy and Foresight Energy said they believe this new business partnership will lead to significant synergies, as previously disclosed, which will lead to even lower mining costs and safer operations, and will provide for future growth of both companies through integrations and future drop-downs of other assets into the public partnership. Upon consummation of the transaction, it is expected that Robert D. Moore, the chief financial officer and chief operating officer of Murray Energy, will also become the chief executive officer of Foresight Energy and join its Board of Directors.
Murray Energy will pay Foresight Reserves cash consideration of approximately $1.37 billion and will acquire:
- a 34% (previously 80%) voting interest in Foresight Energy GP, with the same 77.5% of the incentive distribution rights as provided in the prior agreement;
- approximately 50% (same as under the previous agreement) of the limited partner interest in Foresight Energy LP, including all of the outstanding subordinated units held by Foresight Reserves; and
- the same access to certain other coal handling, transportation and transloading facilities as provided under the previous agreement.
Murray Energy will pay $75 million of the $1.37 billion purchase price to Foresight Reserves from the proceeds of the sale of yield producing assets by Murray Energy to FELP, which are expected to be accretive to Foresight Energy LP. In addition, Murray Energy will have the ability, subject to a number of material conditions, to purchase an additional 46% of the voting interests in Foresight Energy GP for $25 million during a five-year period.
As a result of the new transaction terms, no change of control will result under Foresight Energy LP credit facilities or the indenture governing Foresight Energy LP’s senior notes, all of which will remain in place and/or outstanding, as the case may be, after closing. In addition, Murray Energy expects to incur approximately $150 million less of indebtedness in order to consummate the transaction (as compared to the previously contemplated transaction). This transaction is subject to closing conditions, including obtaining necessary financing.
Murray Energy, based in Ohio, is a major coal producer in states like West Virginia, Ohio, Kentucky, Illinois and Utah. The Foresight companies are major and rapidly-growing producers of coal in Illinois.