Alpha bets

31 Jan 2011 By Christopher Swann

For a firm hobbled by the worst mining accident in decades, Massey has pulled off a coup with a $7.1 bln sale to its rival. The companies fit well together and should be strong in the redhot market for steelmaking coal. But the synergies don’t fully justify Alpha’s fat premium.

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Alpha Natural Resources said on Jan. 29 it agreed to a $7.1 billion deal to buy Massey Energy Co which was rocked by a deadly coal mining accident last year.

The deal the latest in a wave of consolidation sweeping the industry creates the second largest U.S. coal miner by market value, holding 110 mines and combined coal reserves of 5 billion tonnes. The deal is expected to be completed in mid2011.

Massey shareholders will receive 1.025 Alpha shares for each Massey share in addition to $10 a share in cash, for a value of about $69.33 a share, the companies said. That represents a 21 percent premium over Massey's closing share price of $57.23 on Jan. 28. In the months following the disaster, Massey shares lost more than half their value, hitting a low of $25.87 in July.

They have since bounced back to above preexplosion levels, helped by reports that the company would likely be acquired.

The merger with Alpha will create annual cost savings of $150 million by the second year of operations, the companies said. It is expected to add to Alpha's cash flow in the first full year.

Context News

Alpha Natural Resources said on Jan. 29 it agreed to a $7.1 billion deal to buy Massey Energy Co which was rocked by a deadly coal mining accident last year.

They have since bounced back to above preexplosion levels, helped by reports that the company would likely be acquired.

The merger with Alpha will create annual cost savings of $150 million by the second year of operations, the companies said. It is expected to add to Alpha's cash flow in the first full year.

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