Investors salute Patriot Coal

Shares of Patriot Coal surged more than 20 percent Thursday morning, a day after the coal producer announced an agreement to buy Magnum Coal Co. for $709 million in stock and debt.

The transaction will make the company the second largest coal producer in central Appalachia and the seventh largest in the nation with sales of more than 40 million tons of coal in 2007 and revenue of almost $2 billion. Together, the companies own 2 billion tons of coal reserves.

Magnum, based in Charleston, W.Va., has 1,700 employees and owns 12 mines and seven preparation plants.

Shares of Creve Coeur-based Patriot, which was spun off from Peabody Energy Corp. five months ago, rose to $57.10 at 11:45 a.m. on the New York Stock Exchange, up from Wednesday’s close of $46.95. The stock is up 80 percent since it began trading at $32 on Oct. 18.

Magnum stockholders will receive 11.9 million newly issued Patriot shares. Patriot also will assume $150 million in debt.