Arch Coal has signed a definitive agreement with International Coal Group (ICG) to acquire all the outstanding shares of ICG for $14.60 per share, in an all-cash transaction valued at $3.4bn.

The combined company will be the second-largest metallurgical coal supplier in the US, with a total of 5.5 billion tonnes of coal reserves.

The firm will also have a balanced split of 50% of earnings generated from eastern operations and 50% from western operations.

ICG’s assets include 13 active mining complexes and one major mining complex under development across three coal basins.

ICG’s Tygart Valley No. 1 met mine, which is currently under development, is expected to come online in early 2014.

Arch Coal’s president and CEO, John Eaves, said the combination with ICG creates a highly effective platform for optimising the value of the combined company’s met product slate, and for creating entirely new synthetic blends of mid-volatile met coals that command a significant premium in the global market.