Friday, November 5, 2010

Massey Energy Reviewing Offer From Alpha Natural Resources or Is it Arch Coal

According to the WSJ, Massey Energy (MEE) is reviewing a buyout offer from Alpha Natural Resources (ANR). Oddly though the title of the article currently says Arch Coal (ACI) instead of ANR. For the last couple of weeks, its been speculated that MEE was on the auction block.

MEE is a major holding of our Opportunistic and Growth portfolios since the stock swooned down to the $30 area following the mine explosion in April. The stock is up roughly 12% to $47 providing for a major gain already so any large premium over this level would be sweet.

Unfortunately, these portfolios are also heavily invested in ANR so a buyout by them would likely dilute the gain as their stock will possibly drop similar to todays reaction where MEEs gain has doubled ANRs loss. Still very positive, but naturally we'd prefer another suitor over ANR. Since ANR has a lot of similarities to MEE especially the US met coal production and reserves and outside buyer would also drive up their price.

Oh well, can't win them all. MEE shares in the hands of another management team will likely be positive for shareholders. Current MEE CEO is on the hot seat with regulators and it's having a drastic impact on production and profits.

Weekend could be action packed as I'm sure any buyout will attract other suitors as the met coal reserves of MEE are highly sought after.


Via WSJ:

Coal miner Massey Energy Co. is weighing a takeover offer from rival Alpha Natural Resources Inc., and is expected to review options that include an auction at a board meeting later this month, according to people familiar with the matter.

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