Alpha Natural Resources Inc. (ANR) and Massey Energy Company (MEE) have said their merger agreement entered in January 2011 has received the necessary antitrust approvals.
The companies announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired in connection with Alpha’s agreement to acquire Massey. The companies have also met all the required antitrust conditions to closing the deal.
However, the merger transaction between Alpha and Massey still has to fulfill certain customary closing conditions, including Alpha’s Registration Statement on Form S-4 becoming effective and stockholder approval of both companies. Alpha said it had filed for registration with the Securities and Exchange Commission on March 17, 2011.
Pending the fulfillment of these conditions, the companies expect to close the merger in mid-2011.
One of the few reasons for the said merger of Massey with Alpha is the company’s losses as well as the ongoing dispute with the federal government regarding the investigations into the April 2010 Upper Big Branch accident, which has approached its first anniversary.
Under the deal, Massey and Alpha have agreed to an $8.5 billion stock and cash deal to combine their resources. Alpha will acquire all outstanding shares of Massey for the payment of 1.025 of its own shares and $10.00 in cash for each Massey share. This takes the net price payable by Alpha up to $69.33 per share, representing a 21% premium to Massey’s share price as of January 28, 2011.
At closing, Alpha and Massey shareholders will own roughly 54% and 46% of the combined company, respectively.
The Alpha-Massey merger will combine some of the world’s largest and highest-quality metallurgical coal reserve bases. The combined company will create about 5 billion tons of coal reserves and more than 110 mines in the U.S. Appalachian region and Wyoming’s Powder River Basin.
Alpha itself has 60 active mines throughout Virginia, West Virginia, Kentucky, Pennsylvania and Wyoming; while the largest coal producer in Central Appalachia, Massey Energy, operates about 56 mines in West Virginia, Kentucky and Virginia.
As a result, the merged company will benefit from the geographical and asset diversification through the spread of operations and reserves in Central and Northern Appalachia, the Illinois Basin and the Powder River Basin in Wyoming.
The combined company is also expected to 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.
Both Massey Energy and Alpha Natural Resources currently hold a Zacks #3 Rank (short-term Hold). We retain our long term Neutral ratings on the stocks.
ALPHA NATRL RES (ANR): Free Stock Analysis Report
MASSEY EGY CPY (MEE): Free Stock Analysis Report
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