By the OGJ Online Staff
HOUSTON, Feb. 22�Covington, Ky.-based Ashland Inc. said Thursday it sold its remaining common stock in Arch Coal Inc., St. Louis, the second largest US coal producer, and will use the proceeds to pay down corporate debt.
Ashland said it sold about 4.7 million shares of Arch common stock at $19/share through an underwritten public offering. Last year, Ashland distributed 17.4 million of its 22.1 million shares of Arch Coal in the form of a taxable dividend to its shareholders.
Concurrently, Arch Coal said it completed a primary offering of 5.2 million shares of stock at a sale price of $19/share and will use the proceeds to pay debt. The offering was conducted in conjunction with Ashland's secondary stock offering. Arch said net proceeds of the primary offering, after the underwriter's discount, totaled $93.2 million.
"We view this transaction as a very positive development for the corporation and its shareholders," said Arch Coal CEO Steven F. Leer. "The price of Arch Coal stock has risen substantially in recent weeks, and the secondary offering by Ashland Inc. created an excellent opportunity for Arch to issue a small number of primary shares for the purpose of raising capital to pay down debt. We believe that strengthening our balance sheet is one of the best means available to create value for our shareholders."
Since the shares of Arch Coal were distributed to Ashland shareholders in March 2000, the value of the stock has increased from $7.18 to $22.30, its Wednesday closing price on the New York Stock Exchange (NYSE). Shares of Arch Coal were off 39� at $21.91 in early Thursday trading.
Arch Coal was created in July 1997 with the merger of Arch Mineral Corp. and Ashland Coal Inc. Ashland owned 51% of Arch Mineral and 57% of Ashland Coal when the two companies merged. Ashland first announced that it was looking to sell Arch Coal in 1999.
Arch supplies one-tenth of America's total coal supply with the vast majority sold to US utilities. With sales of 115 million tons/year, Arch's mines provide the fuel for 6% of the electricity used by Americans each year. With a US reserve base totaling 3.5 billion tons, Arch shipped its products to 140 power plants in 30 states, and exported coal to utility and industrial customers in 10 foreign countries.
Of that total, 90% is low in sulfur and nearly 70% meets the most stringent requirements of the Clean Air Act, the company said. The company operates mining complexes in six states and in each of America�s three principal low-sulfur coal basins.