US-based Alpha Natural Resources, Inc. has agreed to acquire its Western Virginia-based rival Massey Energy Company, which has been struggling after a coal mining accident that killed 29 workers last year.
According to the companies' statements, they have signed a definitive agreement under which Alpha will acquire all outstanding shares of Massey common stock, subject to customary closing conditions including stockholder approval of both companies. Under the terms of the agreement, Massey stockholders will receive 1.025 shares of Alpha common stock and $10.00 in cash for each share of Massey common stock.
Based on the closing share price of Alpha common stock as of January 28, 2011, the agreement placed a value of $69.33 per share of Massey common stock, implying $8.5 billion enterprise value for Massey, and represents a 21 percent premium to Massey's current share price. Upon completion of the transaction, Alpha and Massey stockholders will own approximately 54 percent and 46 percent of the combined company, respectively.
The merger will bring together Alpha's and Massey's highly complementary assets, which include more than 110 mines and combined coal reserves of approximately 5 billion tons, including one of the world's largest and highest-quality metallurgical coal reserve bases, Massey said.
Resulting company worth approx. $15 billion
The resulting company will have an attractive financial profile with expected pro forma 2010 revenues of approximately $6.9 billion and the highest free cash flow generation of any pureplay US coal company and a combined enterprise value of approximately $15 billion.
"We're very pleased that Massey has chosen to join forces with Alpha and commit to this truly transformational deal," said Kevin Crutchfield, Alpha's chief executive officer. "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 US and overseas," he added.
Baxter F. Phillips, Jr., Massey's chief executive officer and president, stated, "This transaction represents a tremendous opportunity for Massey to partner with our Central Appalachian neighbor, Alpha, to create a new industry leader. After a careful review of a wide range of strategic opportunities, our board unanimously determined that this is the right course for our company."
The April explosion at Massey's Upper Big Branch mine killed 29 workers and was the deadliest US mining disaster in over 25 years. Massey reported very poor financial results after the incident and was looking into takeover options.