NEW YORK (AP) — Massey Energy Co., struggling with losses after an explosion that killed 29 workers at a West Virginia coal mine last spring, agreed Saturday to be taken over by Alpha Natural Resources Inc.
Alpha is paying $7.1 billion in cash and stock for Massey, 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.
Asked about safety concerns at Massey's operations, Crutchfield said, "We try to let our performance speak for itself. Nobody is perfect, but we have a very good record regarding safety and a good working relationship with regulators."
He added, "Massey has a lot of great people who want to do the right thing."
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 fourth-quarter results. Alpha expects the deal will help the combined company cut costs by at least $150 million a year.
Recent reports have suggested Massey was also being sought by global steel conglomerate ArcelorMittal SA.
Alpha, based in Abingdon, Va., is the leading U.S. producer of metallurgical coal — the kind used to make steel as opposed to electricity — while ArcelorMittal already owns several metallurgical coal mines in Appalachia. Demand from steelmakers allows coal producers to charge premium prices of $200 or more a ton, more than double the price of Appalachian coal sold to power plants.
About 1.3 billion tons of Massey's 2.9 billion tons of coal reserves is metallurgical coal. Under Blankenship, the company increased coal exports and opened important inroads to India, which is seen as the next big industrial market by some in the coal industry.
Massey has faced questions about its safety practices since a fire killed two miners at it Aracoma Alma No. 1 mine in West Virginia in January 2006. The fire helped persuade Congress to pass sweeping safety changes that year.
Alpha, on the other hand, has faced few questions about its safety practices and Crutchfield has been an invited speaker at industry safety conference. It has avoided major disasters, though several miners have died at its operations. Most notable was a roof collapse that killed two miners in Cucumber, W.Va., in January 2007.
The April explosion, the worst U.S. mining disaster in 40 years, 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 broken equipment or an excessive buildup of coal dust contributed to the blast.