Coal and natural gas company, CONSOL Energy Inc. (CNX), has entered into an agreement to buy 9.5 million shares of CNX Gas Corporation (CXG) from stockholders represented by T. Rowe Price Associates (TROW).
CONSOL Energy currently owns 83.3% of CNX Gas’ 151 million outstanding shares. The coal and natural gas company has agreed to pay $38.25 per share for the remaining 9.5 million CNX shares, representing roughly 37% of the stake.
Under the agreement, CONSOL Energy has agreed to commence a tender offer for the remaining outstanding shares of CNX Gas it does not own by May 5, 2010. The contemplated tender offer price of $38.25 per share represents a 24% premium from the closing price of CNX Gas on March 19, 2010. In all, CONSOL will pay about $363 million for the T. Rowe Price controlled shares.
CONSOL Energy plans to finance the deal with internal funds, borrowings under its credit agreements and securities offerings. CONSOL, one of the nation’s top four coal producers, last week agreed to buy Dominion Resources Inc’s (D) Appalachian natural gas properties for $3.48 billion in cash, giving Consol a leading position in the growing Marcellus Shale field. The buyout is expected to close by April end.
Furthermore, on March 22, 2010, the company announced a public offering to sell $1.75 billion shares and an offering of $2.75 billion senior notes. The notes offering will include notes due 2017 and notes due 2020, with specific amounts of each not specified yet.
The company plans to use the net proceeds from the notes offering to fund part of its $3.48 billion acquisition of the Appalachian exploration and production business of Dominion Resources Inc. The $1.75 billion shares offering is expected to fund a part of the Dominion acquisition and a part of the CNX Gas acquisition.
If the buyouts are not completed, CONSOL plans to use the proceeds for general corporate purposes, including future acquisitions, capital expenditures, additions to working capital, buybacks and repayment or refinancing of debt.
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