Alpha Natural Resources, Inc. (ANR), the third-biggest U.S. coal producer, said on Saturday it agreed to a $8.5 billion deal to buy Massey Energy Company (MEE).
Under the terms of the deal, Massey shareholders will receive 1.025 shares of Alpha common stock and $10.00 in cash for each share held, valuing Massey Energy at $69.33 per share (implying $8.5 billion enterprise value for Massey), or 21% more than MEE’s last trading price on Friday. Upon completion of the transaction, Alpha and Massey stockholders will own approximately 54% and 46% of the combined company, respectively.
“We’re very pleased that Massey has chosen to join forces with Alpha and commit to this truly transformational deal,” Kevin Crutchfield, Alpha’s chief executive officer, said in a statement.
The merger, according to a statement from the co.’s, which said both their boards had approved the transaction, will bring together Alpha’s and Massey’s highly complementary assets, which include more than 110 mines and combined coal reserves of approximately 5 billion tons, including one of the world’s largest and highest-quality metallurgical coal reserve bases. Alpha and Massey believe the new entity will be well positioned to capitalize on strong global demand trends for coal including the metallurgical coal used in the steel manufacturing process.
The combined operations will have an attractive financial profile with expected pro forma 2010 revenues of approximately $6.9 billion and the highest free cash flow generation of any pure-play U.S. coal company with a combined enterprise value of approximately $15 billion.
Stockholders and customers of both companies will also benefit from synergies which are expected to exceed an annual run-rate of $150 million within the second year of operations, as well as anticipated cash flow accretion in the first full year of combined operations.
Alpha said it has obtained $3.3 billion in committed financing from Morgan Stanley (MS) and Citigroup (C) which, in addition to existing cash balances, will be sufficient to finance cash consideration to Massey stockholders and to refinance certain existing Alpha and Massey debt.