Alpha-Massey coal merger creates global player
- February 28, 2011
Alpha Natural Resources hasn’t reached its 10th anniversary yet, but it already is a major global player in the coal industry.
In late January, the company, now based in Abingdon, sealed an $8.5 billion cash and stock deal to acquire Richmond-based Massey Energy Co.
The deal would make Alpha, founded in 2002, the world’s third largest producer of metallurgical coal, which is used in making steel. (Australia-based BHP Billiton Mitsubishi Alliance and Canada-based Teck Resources Ltd. are ranked first and second.)
“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 U.S. and overseas.” Kevin Crutchfield, Alpha’s chief executive officer, said in a statement. “The strategic and operational fit of our two companies is clear and compelling.”
Massey Energy has been the subject of civil and criminal investigations since an April mine accident killed 29 miners in West Virginia. The company has reported earnings losses ever since. Don Blankenship, Massey’s combative longtime CEO, retired at the end of last year. He had been the staunchest opponent to selling the company.
The merger announcement came at a time when many international customers of Australian metallurgical coal were looking for new suppliers because of flooding in coal mines in Queensland. The floods have reduced the production and shipping of seaborne coal, tightening the market. Alpha officials expect the demand for metallurgical coal to follow a dramatically rising need for steel in coming years, especially in Asia and other high-growth areas.
Spokesman Rick Nida said Alpha and Massey officials had talked about a possible merger off and on for a number of months, but serious negotiations began after Massey’s board decided to conduct a strategic review of its options.
Once the Alpha-Massey merger is complete, the combined company will have 14,000 employees, more than 110 mines and coal reserves of about 5 billion tons. In 2010, the companies had total revenues of $6.9 billion.
The merger still needs to be approved by government authorities and the companies’ shareholders, a process that could take several months.
The role of Massey’s Richmond headquarters staff is unclear at this point. “We intend to keep a presence in Richmond after the merger, but the nature and number of those jobs will not be known until the transaction closes and the integration of the two companies begins,” Nida said.
The merger effectively ends Massey’s 95-year history as a coal company based in Richmond, where it was a benefactor of organizations such as the Massey Cancer Center at Virginia Commonwealth University.
Under the merger agreement, Massey shareholders will receive 1.025 shares of Alpha common stock and $10 in cash for each share of Massey stock they own.
Alpha is building a new 130,000-square-foot headquarters building in Bristol, Va.