Alpha Natural Resources Inc said it agreed to buy Foundation Coal Holdings Inc for $2 billion in stock in a deal that would create the third-largest coal producer in the United States.

Under the deal, Foundation stockholders will receive 1.084 shares of the new company for each share held, with Alpha Natural owning 59 percent of the combined entity.

The deal values Foundation Coal at $32.73 a share and is at a 41 percent premium to Foundation's Monday closing price of $23.24. The combined company will have a market capitalization of $3.5 billion and enterprise value of $4 billion, Alpha Natural said.

Coal prices rose in recent years on demand for power generation and steel production in China and other developing economies. But spot prices fell as demand slumped amid the economic downturn.

Shares of Alpha Natural closed at $28.86 Monday on the New York Stock Exchange. (Reporting by Chakradhar Adusumilli in Bangalore, Editing by Dinesh Nair)