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British company acquires largest U.S. coal producer

By ISABELLE CLARY UPI Business Writer

NEW YORK -- Hanson Industries North America, the subsidiary of a major British holding company, said Thursday it was acquiring Peabody Holding Co., the largest U.S. coal producer, in a two-stage transaction worth a total $1.2 billion.

Hanson Industries has already secured a 45.03 percent stake in Peabody Holding, the St. Louis-based parent of Peabody Coal Co., which produced 87 million tons of coal in 1989 -- 9 percent of the nation's output of about 970 million tons.

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Sir Gordon White, chairman of Hanson Industries, said the company has signed an agreement to acquire the remaining 54.97 percent of Peabody Holding from Newmont Mining Corp. for $715 million in cash.

'We believe that coal will continue to be an important long-term source of energy for the United States and that new technologies will increase its efficiency as a low-cost fuel,' White said.

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The subsidiary of the London-based diversified holding group Hanson PLC first announced it was acquiring nearly half of the coal producer in February, through an agreement to buy the 45.03 percent stake in Peabody Holding for $504 million in cash from three shareholders -- aircraft manufacturer Boeing Co., the financial group Bechtel Investments Inc., and Eastern Enterprises, a gas barge operator.

'Peabody is a leader in its field, and it is a company with excellent cash generation,' White commented while announcing the cash offer.

Peabody Holding's coal reserves are estimated at 8.3 billion tons. The company reported revenues of $1.7 billion in 1989 and estimated its assets at $621.9 million.

Hanson Industries said the February transaction is to be completed in a matter of days. The acquisition of the remaining stake is subject to regulatory approval as well as to a favorable vote by at least 80 percent of Newmont's shareholders, the company said.

'I am not surprised that Hanson Industries gets involved in coal mining because it is an industry with a positive cash flow,' said Carol Neves, industry analyst at Merryll Lynch Research/U.S. 'It is a good move for Hanson as well as for Newmont, which can expect a strong cash infusion with the sale.'

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Neves did not express concern over the acquisition of the leading U.S. coal producer by a British-led consortium.

'It is a company which is truly half-British, half-American,' she said.

Hanson Industries said the holding company's overall operations were divided roughly on a 50-50 percent basis between Britain and the United States.

There is little doubt that at least 80 percent of Newmont's shareholders will approve the deal, because Hanson Industries already owns 49.3 percent of Newmont Mining. Closing of the sale is expected in June.

In August 1989, Hanson Industries bought Consolidated Gold Fields and its near-majority stake in Newmont.

The sale of Newmont's stock in Peabody Holding was unanimously approved by the Newmont board, including directors not affiliated with Hanson Industries.

When completed, the two-stage acquisition will amount to an all-cash $1.2 billion merger, marking the first major energy-mining involvement of the highly diversified British-American industrial management corporation, which also owns Kaiser Cement.

Peabody Holding was formed in 1976 by a Newmont-led consortium which purchased Peabody Coal from Kennecott Copper Corp.

Newmont's main remaining asset is its 90.1 percent ownership of Newmont Gold Co., the largest U.S. gold producer.

Newmont entered financial straits in 1987 when it heavily borrowed to fend off a hostile takeover attempt by Texas investor T. Boone Pickens. The company said it will use proceeds of the sale for recapitalization.

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Newmont stock rose sharply on the New York Stock exchange following the sale agreement, and was trading in late afternoon up $2.375 to $47.75. Hanson Industries also rose and was up 12.50 cents to $18.875.

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