Takeover Agreement for Massey Coal

Alpha Natural Said to Be Near to $7 Billion Takeover Agreement for Massey
Alpha Natural Resources Inc., the third-biggest U.S. coal producer, is close to an agreement to buy Massey Energy Co. for about $7 billion, according to a person familiar with the situation.
The stock and cash offer values Massey, the largest Central Appalachian coal producer, at $68 to $69 a share, said the person, who declined to be identified because the talks are private. An agreement may be reached as early as today and announced on Jan. 31, this person said. The Wall Street Journal reported the deal earlier.
Massey shareholders will receive about 1.025 Alpha shares, plus $10 in cash for each share held, representing an almost 20 percent premium from Massey’s closing share price yesterday, according to the person. The boards of Alpha and Massey have been briefed on details of the deal, the person said. The runner-up for Richmond, Virginia-based Massey was Arch Coal Inc., according to the person.
Jeff Gillenwater, a Massey spokesman, didn’t return e-mail and telephone messages. Ted Pile, a spokesman for Abingdon, Virginia-based Alpha, declined to comment. Telephone messages and e-mails left outside of normal business hours for Kim Link, an Arch spokeswoman, weren’t immediately returned.
Alpha, the largest U.S. metallurgical coal producer, has operations in Virginia, West Virginia, Kentucky, Pennsylvania and in Wyoming’s Powder River Basin.
Foundation Purchase
The Abingdon, Virginia-based company bought Foundation Coal Holdings Inc. for $2 billion in July 2009 to gain access to the low-cost thermal coal reserves in Wyoming, and controls about 2.3 billion tons of reserves.
Massey has about 2.8 billion tons of reserves, 1.3 billion of which is of the metallurgical or coking coal used to produce steel. Prices for steelmaking coal may surge 78 percent to a record $400 a metric ton for the three-month contract starting April 1, amid flooding in Queensland, Australia, which has disrupted supply, Bank of America Merrill Lynch said in a Jan. 25 report.
The company owns the Upper Big Branch mine near Montcoal, West Virginia, where 29 people died in an April 5 explosion, the worst U.S. coal mining disaster in 40 years. Massey has posted consecutive losses since the accident, citing associated costs and increased regulatory scrutiny.
Massey rose $2.84, or 5.2 percent, to $57.23 in New York Stock Exchange composite trading yesterday. The shares had fallen 35 percent since the fatal blast before surging on an Oct. 18 Wall Street Journal report that it was weighing a sale.

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