CONSOL Energy to Offer to Acquire Remaining Shares of CNX Gas
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PITTSBURGH, Jan. 29 -- CONSOL Energy Inc. (NYSE:CNX) intends to offer to acquire all of the outstanding shares of CNX Gas Corporation (NYSE:CXG) that it does not currently own in a stock-for- stock transaction. CONSOL Energy currently owns approximately 81.7 percent of the approximately 151 million shares of CNX Gas common stock outstanding. CONSOL Energy will offer CNX Gas stockholders 0.4425 shares of CONSOL Energy common stock for each outstanding share of CNX Gas common stock that CONSOL Energy does not own, the equivalent of $33.70 per share for CNX Gas common stock, or a 12 percent premium based upon the closing stock price of CNX Gas on January 28, 2008. The transaction is valued at approximately $932 million.
CONSOL Energy's offer will be made directly to the CNX Gas stockholders and will not be conditioned upon any requirement for recommendation of its offer by the independent directors of CNX Gas. The CONSOL Energy exchange offer will be conditioned upon, among other things, the tender of a majority of the outstanding shares of CNX Gas common stock not owned by CONSOL Energy, without regard to any shares of CNX Gas that are owned by the directors or management of either CONSOL Energy or CNX Gas. This condition will be irrevocable. The exchange offer will also be subject to other customary terms and conditions and is intended to be tax-free to the shareholders of CNX Gas.
Assuming that the conditions to CONSOL Energy's exchange offer are satisfied and that the offer is completed, consistent with the requirements of Delaware law, CONSOL Energy intends to effect a "short form" merger of CNX Gas with a subsidiary of CONSOL Energy promptly thereafter. In this subsequent merger, the remaining CNX Gas public stockholders will be entitled to receive the same consideration as is paid in the exchange offer. Under Delaware law, appraisal rights will also be available to the former stockholders of CNX Gas as a result of the merger. CONSOL Energy does not intend to take any retributive action should its exchange offer be unsuccessful.
"We have always believed that a diversified energy portfolio of coal and gas, which combined account for two-thirds of fuel for U.S. electricity generation, is a winning combination," said J. Brett Harvey, president and chief executive officer. "The acquisition of the remaining outstanding shares of CNX Gas will give us the greatest flexibility in the access, allocation and utilization of our capital in growing that diversified portfolio."
Harvey said a number of factors have changed since CNX Gas went public. "Two years ago, financial markets did not understand or properly value the gas assets and operations of CONSOL Energy," Harvey said. "In the two years since we established CNX Gas as a public company, its visibility and transparency have improved, and financial markets appear to have a greater appreciation for its value, as evidenced by the significant growth in the market value of CNX Gas."
Harvey went on to explain that as the majority owner of CNX Gas, CONSOL Energy had to make a decision regarding the gas company's future. CONSOL Energy concluded that it has no interest in selling or otherwise divesting itself of the shares of CNX Gas that it currently owns. "We chose to stick to our strategy of energy asset diversification, and hence to offer to re-acquire the remaining shares of the gas company."
Harvey also said that energy markets over the next ten years will be affected increasingly by public policy issues, both in the United States and globally. "It is becoming increasingly apparent," he said, "that carbon constraints will become a part of energy regulation in the United States. Such constraints pose challenges for all fossil fuels, but would affect gas to a lesser extent than coal or petroleum."
Harvey said neither the United States nor the world will turn its back on coal because the energy produced from coal is vital to raising the prosperity of people around the world. "But substantially reducing carbon dioxide emissions produced when coal is consumed will become an essential predicate to its continued use," he argued. "From the CONSOL Energy stockholders' perspective, increasing the portion of gas in our energy portfolio is a prudent step to manage the risk associated with carbon controls, because with its lower emissions, gas will become more valuable in the near term."
Harvey added, however, that CONSOL Energy expects its coal portfolio to perform well during the transition period when the impacts of carbon constraints begin to be felt. "Coal will not be eliminated from the U.S. energy mix because we need the energy," he said. "But there could be some winnowing of coal producers if carbon constraints shrink the market for coal in the short run. Most of our major mining operations are well capitalized and have a substantial reserve base. Existing coal mines with that type of profile will do very well."
Harvey said the integration of CNX Gas into CONSOL Energy is expected to result in cost savings and certain business synergies. "We expect there to be a significant reduction in administrative costs, particularly those imposed on any public enterprise for compliance and reporting," he said.
Harvey said CONSOL Energy is in the process of preparing the necessary documentation to file its exchange offer and related documentation with the Securities and Exchange Commission. "We intend to launch our offer in the coming days and expect to complete this transaction in the first half of 2008," he concluded.
CONSOL Energy Inc., a high-Btu bituminous coal and coal bed methane company, is a member of the Standard & Poor's 500 Equity Index and has annual revenues of $3.7 billion. It has 17 bituminous coal mining complexes in six states and reports proven and probable coal reserves of 4.5 billion tons. CONSOL Energy was named one of America's most admired companies in 2005 by Fortune magazine. It received the U.S. Department of the Interior's Office of Surface Mining National Award for Excellence in Surface Mining for the company's innovative reclamation practices in 2002, 2003 and 2004. Also in 2003, the company was listed in Information Week magazine's "Information Week 500" list for its information technology operations. In 2002, the company received a U.S. Environmental Protection Agency Climate Protection Award. Additional information about the company can be found at its web site: www.consolenergy.com.
CNX GAS CORPORATION is an independent natural gas exploration, development, production and gathering company operating in the Appalachian and Illinois basins of the United States. CONSOL Energy currently owns approximately 81.7 percent of the approximately 151 million shares of CNX Gas common stock outstanding.
Source: CONSOL Energy Inc.
CONTACT: Thomas F. Hoffman, +1-412-831-4060 or Chuck Mazur,+1-412-831-4340,
both of CONSOL Energy Inc.
Web site: www.consolenergy.com/
