Message Font: Serif | Sans-Serif
No. of Recommendations: 3
Peabody Energy's Board of Directors Approves Spin-Off of Patriot Coal Corporation
Wednesday October 10, 6:04 pm ET

ST. LOUIS, Oct. 10 /PRNewswire-FirstCall/ -- Peabody Energy (NYSE: BTU - News) today announced that its board of directors has approved a spin-off of coal assets and operations in West Virginia and Kentucky to BTU shareholders. The spin-off will be accomplished through a special dividend of all outstanding shares of Patriot Coal Corporation, which would then be an independent public company traded on the New York Stock Exchange under the ticker symbol PCX.

Patriot Coal Transitions to Publicly Traded Company and Names Board of Directors

ST. LOUIS, Oct. 10 /PRNewswire-FirstCall/ -- Patriot Coal Corporation
(NYSE: PCX) today announced that it is transitioning to an independent,
public company to be traded on the New York Stock Exchange under the ticker
symbol PCX.

Distribution of Patriot stock to Peabody Energy shareholders is
expected to occur on October 31, 2007 at a ratio of one share of Patriot
Coal stock for every 10 shares of Peabody held. The distribution is
contingent upon Patriot's registration statement on Form 10 being declared
effective by the Securities and Exchange Commission (SEC), along with other
conditions outlined in the information statement filed with the SEC.

Foolish thoughts:

Saluting Patriot Coal
By Toby Shute May 21, 2007

A week ago, Peabody Energy (NYSE: BTU) publicly initiated a spinoff of Patriot Coal, a subsidiary that includes its Appalachian properties. That didn't take too long. Less than a month ago, I noted the company's hiring of Morgan Stanley (NYSE: MS) to explore strategic alternatives for these assets.

Previously, I viewed the spinoff as primarily an unloading of a troublesome piece of Peabody's increasingly global coal business. I stand by my conclusion that "Peabody is going where the growth is." However, there's an aspect of the Patriot Coal business that I had not adequately considered.

In its registration statement with the SEC, Patriot Coal talks about strategies to maximize operational performance, keep customers happy, and pursue growth by various means. But there's one core strategy that stands out from all the rest:

We are well positioned to be a consolidator in Central Appalachia. Our reserves and operations in Central Appalachia are contiguous or in close proximity to numerous small- and medium-sized operators. The breadth of our reserves creates opportunities for growth through acquisitions, reserve transactions and joint ventures involving those operators who seek to monetize their holdings.

There you have it. Consolidation is the key to understanding Patriot as it sets forth on its own.

Consolidation is also music to any coal investor's ears. With a less-fragmented Appalachian region, think about how much more effectively industry participants like Arch Coal (NYSE: ACI) and International Coal Group (NYSE: ICO) will be able to coordinate "disciplined production." That's fancy talk for cutting production in the face of an inventory glut in order to keep prices high. I think the market will reward Patriot for successful consolidation moves. For that reason, Peabody shareholders should consider hanging onto their Patriot shares in order to realize that value over time.

Denny Schlesinger
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.