Moving to get rid of some lumps of coal, Los Angeles-based Atlantic Richfield Co. said Friday that it is in exclusive talks to sell its six U.S. coal-mining operations to Beacon Group.
The deal, valued by analysts at between $1 billion and $1.5 billion, is the latest in a series of efforts by energy companies to divest their coal operations and to focus instead on more-profitable oil and natural gas holdings.
“If you do too many things at once, you don’t do any well,” said Bruce Raabe, a Collins & Co. analyst in San Francisco. “The sale makes a lot of sense to me. Arco can redeploy the funds into exploration or refining.”
Arco’s profit from the mines have been dropping, from $75 million in 1995 to $57 million last year, despite the addition of three Utah mines in late 1996 purchased jointly with Japan’s Itochu Corp.
Arco announced last year that it would sell off its coal assets. Analysts say the company may be taking its time to wait for the best deal.
“Arco is not willing to give it away,” said analyst Mark Hastings at Merrill Lynch in New York.
But other coal properties on the market could drive down prices, Hastings said. In January, Kerr-McGee Corp., the nation’s seventh-largest coal producer, put its coal holdings up for sale to concentrate on its gas and oil interests.
The Arco mines--in Wyoming, Colorado, and Utah--accounted for about 3% of the company’s $1.7 billion in earnings in 1997, Arco spokesman Albert Greenstein said. The fate of their 1,500 workers is under discussion.
If negotiations are successful, Alliance Corp., an affiliate of New York-based Beacon Group, would become the second-largest coal producer in the U.S., Arco said in a statement.
Arco shares rose $1.50 to close at $77.75 on the New York Stock Exchange.