NEW YORK (AP) — Massey Energy Co., struggling with losses after an explosion that killed 29 workers at a West Virginia coal mine, agreed Saturday to be taken over by Alpha Natural Resources Inc.
Alpha is paying $7.1 billion in cash and stock for the company, the nation’s fourth-largest coal producer by revenue. Massey operates 19 mining complexes in Virginia, West Virginia and Kentucky including the Upper Big Branch mine where the April 5 disaster occurred.
Alpha is offering 1.025 share of its stock for each share of Massey, plus $10 per share in cash. Together, that represents a bid of $69.33 per share, a 21 percent premium over Massey’s closing share price Friday.
In an interview, Alpha CEO Kevin Crutchfield said the acquisition will offer greater access to international markets. Shortages of coal for making steel have driven up prices around the world, a trend Alpha hopes to capitalize on.
"We sell into 20-some countries now and that will increase significantly," Crutchfield said.
Alpha, expects the deal will also help the combined company cut costs by at least $150 million annually.
A sale of Richmond, Va.-based Massey was expected even before the sudden retirement last month of Don Blankenship, the company’s CEO. He was the strongest advocate for remaining an independent company on Massey’s board.
The company’s losses since the disaster were another factor leading to its sale. Massey lost a total of $130 million in the second and third quarters of last year. It has not yet released its fourth-quarter results.
Recent reports have suggested that Massey was also being sought by global steel conglomerate ArcelorMittal SA.
Abingdon, Va.-based Alpha is the leading U.S. producer of metallurgical coal used to make steel, while ArcelorMittal already owns several metallurgical coal mines in Appalachia.
The April explosion is the subject of civil and criminal investigations. On Friday, Massey rejected nearly every part of the federal government’s theory on what caused the deadly explosion. The company doesn’t believe that worn shearer bits, broken water sprayers or an excessive buildup of coal dust contributed to the blast.
Instead, Massey continues to argue there was a sudden inundation of natural gases from a crack in the floor that overwhelmed what it insists were good air flow and other controls that should have contained the blast. It acknowledged the shearing machine that cuts the coal may somehow have ignited the gas but said the company’s own investigators haven’t determined how. Massey won’t issue its own report on the explosion until after state and federal investigators release theirs.
Massey’s stock closed Friday at $57.23. The stock had tumbled from its close of $54.69 the day of the explosion to a low of $26.31 on July 2. Investors sensing the possibility of a takeover have bid the stock higher since then.
Investors profited under Blankenship, but the former CEO alienated neighbors of his company’s mines over environmental issues. His staunch defense of the company after the explosion raised more anger.
A statement from Alpha executives and Massey’s current CEO, Baxter F. Phillips Jr. did not mention the disaster.
The companies said the deal is expected to close by the middle of this year. It must be approved first by regulators and Alpha and Massey shareholders.