The buyout team, led by David Foster, operations director, had been selected as the preferred bidder ahead of Anglo United and another management team.
Coal Products is the largest manufacturer of solid smokeless fuel and foundry coke in the UK. The bid was backed by Legal and General Ventures, with debt facilities arranged by NatWest Markets and Acquisition Finance.
Ray Proctor, British Coal's finance director, said: "This is a very important step in the transfer of our non-mining operations to the private sector. The process has been completed on schedule and we have secured the best value for British Coal and hence the taxpayer."
Coal Products has about 30 per cent of the UK solid smokeless fuel market and some 60 per cent of the foundry coke market. The business made an operating profit last year of about £16m, on turnover of £131m, its best performance since the mid-1970s. The business, which employs about 500 people, has been through significant cost-cutting and now focuses on two smokeless fuel brands, Homefire and Phurnacite.
The business is just one of a dozen subsidiaries being sold separately from British Coal's mining assets. British Coal's scientific services subsidiary, TES Bretby, has been sold to John Mowlem for an estimated £3m. The mining assets in England and Waleswere sold to RJB Mining last year.