April 03, 2008: 02:14 PM EST

NEW YORK (Associated Press) - Shares of Patriot Coal Corp. set a high on Thursday, following news of an acquisition that analysts said is a good fit for the coal miner.

Shares rose $9.32, or 19.9 percent, to $56.27 in afternoon trading, after earlier spiking to $58.50, the highest point the stock has reached since it began trading in October.

Patriot on Wednesday agreed to buy Charleston, W.V.-based Magnum Coal Co. for about $559 million, making Patriot the seventh largest coal producer in the U.S.

Under the terms of the agreement, Magnum shareholders will receive about 11.9 million shares of newly issued Patriot common stock. Patriot will assume about $150 million in debt.

Stifel Nicolaus & Co. analyst Paul Forward, who has a "Hold" rating on the shares, said the deal is a nice fit because many of their operations are located near each other in southern West Virginia.

"We believe the Magnum transaction is likely to be a good fit for Patriot and a large first step in its goal to be a consolidator in the fragmented Central Appalachian (CAAP) coal market," Forward wrote in a client note.

Friedman, Billings, Ramsey analyst Luther Lu said the company will be "transformed" by the acquisition, notably because it will gain surface mining skills, access to large, high-quality reserves, and it will benefit from having access to regional river and rail shipping, which will allow it to take advantage of pricing differences. Lu kept an "Outperform" rating on the shares and said he would change his price $59 target and profit estimates after more information on the buyout is available.