Now that Don Blankenship is out as head of Massey Energy and the company faces serious charges with regard to its safety record and last year's explosion, company executives have decided it's a good time to have the company sold to a company with better government...um..relations.
So Massey Energy will become part of Alpha Natural Resources, in a deal that will allow Massey to benefit from Alpha's better safety record while giving Alpha a hard lock on the coal mining business.
Massey Energy, the embattled coal mine operator, agreed on Saturday to sell itself for about $7.1 billion in cash and stock in a deal that will create a new giant in coal production — and could help Massey shed legal burdens arising from a marred safety record that includes the explosion last year at the Upper Big Branch mine in West Virginia.
Under the terms of the deal, Alpha Natural Resources will pay 1.025 of its own shares and $10 in cash, for a total of $69.33 as of Friday’s market close, for each Massey share. That represents a 21 percent premium to Massey’s Friday closing price of $57.23.
The deal will unite two of the biggest American producers of coal, with more than 110 mines and about five billion tons of combined reserves throughout the Appalachian region, the Midwest and Wyoming. It will also bolster Alpha’s presence in the growing market for metallurgical coal, which is used to make steel. Massey has enormous reserves of metallurgical coal, and it has increased its exports to countries like India and Brazil, where strong demand has driven up global prices for the material.
Massey agreed to the deal today, after stomping their corporate feet and singing "lalalalala" with their fingers in their ears to the government's findings that the cause of last year's blast was a combination of broken equipment, poorly maintained safety devices, and coal dust.
Massey Energy Co. on Friday rejected nearly every part of the federal government's theory on what caused the deadly explosion at its Upper Big Branch mine in West Virginia last spring, killing 29 men.
The Richmond-based coal company doesn't think that worn shearer bits, broken water sprayers or an excessive buildup of coal dust contributed to the blast, Vice President and General Counsel Shane Harvey said.
Instead, Massey continues to argue that there was a sudden inundation of natural gases from a floor crack that overwhelmed what it insists were good airflow and other controls that should have contained the blast.
The Mine Safety and Health Administration has played down the significance of the crack, arguing that it was not venting methane and that any explosion is preventable with proper safeguards. It presented preliminary findings from its continuing investigation last week, saying Massey records and evidence from inside the mine point to poor maintenance as the cause of the blast.
Timing is everything.
Massey faces stiffening regulatory oversight, as well as several state and federal investigations into its operations. On Friday, the company contested the findings of a federal regulator’s inquiry into the Upper Big Branch incident, the worst mining accident in 40 years. A company executive rejected claims that the explosion arose from faulty equipment and excessive levels of coal dust.
Those legal troubles have weighed on Massey: After the Upper Big Branch explosion, the company tallied about $150 million in related expenses, and for for the 12 months ended Sept. 30, it reported $2.9 billion in net revenue but a $72.2 million loss.
Mr. Crutchfield said that he planned to draw on his company’s cleaner safety and environmental record to help resolve Massey’s legal issues, which he conceded would take time.
Which translated means this: Alpha knows someone who knows someone who will give them a break if they promise to clean up their act. And it only cost them a few billion dollars.