Alpha, Massey Close Merger - Analyst Blog

Yesterday, Alpha Natural Resources Inc. (ANR) and Massey Energy Company (MEE) successfully wrapped up their $7.1 billion merger, with their respective stockholders voting in favor of the deal.

The companies said their shareholders approved the various proposals under the merger agreement, facilitating Alpha to acquire all outstanding shares of Massey common stock. Massey stockholders voted to adopt the merger agreement.

On the other hand, Alpha stockholders voted to approve an amendment to its certificate of incorporation to increase the number of shares of common stock that the company is authorized to issue. They also voted in favor of the issuance of Alpha shares to stockholders of Massey.

The merger deal overcame last-minute legal challenges from a small group of institutional investors who charged that the sale was designed to protect Massey officers and directors from liability for the explosion, and not to benefit shareholders. On May 31, courts in Delaware and West Virginia declined to issue orders that would detain Massey shareholders from voting. The lawsuits and other litigation are still pending.

As a part of the merger, Alpha Natural Resources has inherited some extensive reserves of high-demand coal and more than a dozen lawsuits stemming from a deadly mining accident in April 2010.

Massey's safety record has been poor as evident from the hazards of the mining accident at its Upper Big Branch mine in southern West Virginia, which killed 29 miners. The April 5, 2010 tragedy is the worst U.S. mining incident in four decades and remains the subject of ongoing civil and criminal investigations.

Massey also has a tarnished environmental record having paid a record $20 million fine to the Environmental Protection Agency in 2008 for pollution violations.

Alpha management said it hopes to run the combined company in the same manner as its standalone entity. Also, management assured that there will be improved safety performance and better environmental stewardship.

The combined company, which retains Alpha’s name and board, will be the third-largest producer of high-priced metallurgical coal in the world and the dominant U.S. producer of the specialty product used by steelmakers. The deal is expected to bequeath Alpha a 29% share of the U.S. supply of metallurgical coal.

Abingdon, Virginia-based Alpha will now have about 14,000 employees, 5 billion tons of coal reserves and more than 180 mines and processing plants in Kentucky, Pennsylvania, Virginia, West Virginia and Wyoming. On a combined basis, Alpha and Massey sold nearly 102.2 million tons of steam coal and 20.1 million tons of metallurgical coal in 2010.

Furthermore, Alpha now aims to capitalize on strong world demand, which has pushed prices above $300 or more a ton. That's roughly triple the price of Appalachian coal used to generate electricity.

ALPHA NATRL RES (ANR): Free Stock Analysis Report

MASSEY EGY CPY (MEE): Free Stock Analysis Report

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