$8.5 Billion Buys Massey Energy
Alpha Natural Resources is paying that much to acquire Massey, which has been battling MSHA for years, especially about the Upper Big Branch investigation. The combined companies own more than 110 mines and have 5 billion tons of coal reserves.
The end is coming via acquisition for Massey Energy, best known in recent months for owning the West Virginia mine where 29 miners died in an explosion in April 2010 and for battling the Mine Safety and Health Administration during the long investigation that has followed. Coal industry reporters were speculating Sunday about what will change now that Alpha Natural Resources, a larger coal company based in Abingdon, Va., has agreed to acquire Massey for $8.5 billion. The combined companies own more than 110 mines and have 5 billion tons of coal reserves, with about $6.9 billion in combined 2010 revenues.
The companies held a conference call for the investment community at 8 a.m. Jan. 31 that was webcast live at www.alphanr.com and www.masseyenergyco.com.
"We're very pleased that Massey has chosen to join forces with Alpha and commit to this truly transformational deal," Alpha CEO Kevin Crutchfield said in their joint news release. "Together we will be America's largest supplier of metallurgical coal for the world's steel industry and a highly diversified supplier of thermal coal to electric utilities in the U.S. and overseas. The strategic and operational fit of our two companies is clear and compelling. Both companies' stockholders will gain an opportunity to participate in the upside potential of a global industry leader with a robust production portfolio, attractive growth profile and substantial reserve base. Together, we are committed to creating a stronger company that has the scale to capitalize on further growth opportunities, succeed in a changing regulatory landscape and maintain the absolute highest standards in safety and environmental excellence."
"This is not just a combination of strong asset portfolios, but a transaction that will empower a combined group of almost 14,000 people and with a focus on continued investment in safety, the environment and our communities," Crutchfield added.
Baxter F. Phillips, Jr., Massey's CEO and president since his controversial predecssor, Don Blankenship, retired at the end of 2010, said the deal "represents a tremendous opportunity for Massey to partner with our Central Appalachian neighbor, Alpha, to create a new industry leader." He said the transaction "offers Massey stockholders an immediate and substantial premium, as well as the opportunity to participate in the significant value creation opportunities our combination presents."
In a statement posted Monday, United Mine Workers of America President Cecil E. Roberts welcomed the deal, writing: "First, while by no means perfect, Alpha's overall safety record is better than Massey's. Alpha's got quite a job on its hands to turn the former Massey mines around from Massey's safety-last culture. But if they are successful, the miners at the former Massey mines will be at less risk than they have been. Secondly, erasing the Massey name from America's coal industry is a positive step, no matter who is responsible for it. Massey had come to represent all that was wrong with the coal industry, whether it be safety and health issues, environmental issues or simple respect for its workers, their families and the communities where they live. While Alpha inherits those problems from Massey, one hopes that Alpha recognizes that sorry record and has a plan in place to move swiftly toward resolving many of those issues. And lastly, we represent about 1,500 active Alpha employees and thousands of retirees. We have open lines of communication with the company. When measured by the standard set by the previous leadership at Massey, this represents a significant improvement."
Alpha has 6,400 employees, fewer than Massey's 7,500. Pittsburgh Post-Gazette reporters Dennis B. Roddy, Len Boselovic, and Daniel Malloy reported the offer values Massey shares at $69.33, a 21 percent premium above the closing price of $57.23 last Friday.