With demand for raw materials raising the roof across the board, here's why North America's biggest producer of iron-ore pellets, Cleveland-Cliffs, saw it prudent to snap up coal miner Alpha Natural Resources for a cool $10 billion.

Alpha Natural shareholders will get 0.95 of a Cleveland-Cliffs share and $22.23 for each share they own, according to a statement released on Business Wire today. Based on Cleveland-Cliffs' closing price yesterday, the offer is worth $128.12 a share, or a premium of 35 percent to Alpha's stock, it said.

The merged company, named Cliffs Natural Resources, will have estimated 2008 sales of almost $6.5 billion and earnings before interest, taxes, depreciation and amortization, or ebitda, of $1.9 billion, with revenue rising to $10 billion in 2009 and ebitda to $4.7 billion.

The company will own nine iron-ore facilities and more than 60 coal mines in North America, South America and Australia.

"Together, Alpha and Cleveland-Cliffs will have the size, the management depth and the mining expertise to compete on the global stage as demand for raw materials continues to increase around the world," Michael Quillen, chairman of Alpha, said in the statement.

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