Massey Energy Co., owner of the Upper Big Branch mine where 29 people died in April, plans to begin a process to explore the sale of the company and to solicit offers from potential buyers, according to three people with knowledge of the matter.
The company will form a special board committee to study options and may make an announcement as soon as today, said the people, who declined to be identified because the matter is private. The special committee will be advised by Perella Weinberg Partners LP and Cravath Swaine & Moore LLP, the people said. UBS AG will continue to advise the company, they said.
Massey, based in Richmond, Virginia, has received some detailed offers with specific bids from companies such as Alpha Natural Resources Inc., along with approaches from several others companies including ArcelorMittal SA, said two of these people. Arch Coal Inc. and Consol Energy Inc. also expressed interest in acquiring Massey, said these people.
The company, the largest coal producer in Central Appalachia, owns 2.8 billion tons of reserves, 1.3 billion of which are metallurgical coal, used to produce steel. Benchmark prices for that grade of coal have soared to $209 a metric ton for the three-month contract ending Dec. 31, 62 percent higher than a year earlier, driven by demand from China and India.
“Massey has the largest reserve block of U.S. metallurgical coal out there,” said Jeremy Sussman, an analyst at Brean Murray Carret & Co. in New York. “In this type of environment, there probably are a lot of players that are envious of Massey’s reserve base.”
Massey climbed $1.58, or 3.2 percent, to $50.59 at 2:38 p.m. in New York Stock Exchange composite trading, after rising as high as $52.20. The shares have risen 22 percent this year.
Jeff Gillenwater, a Massey spokesman, didn’t immediately return telephone and e-mail messages.
While Chief Executive Officer Don Blankenship, 60, has expressed reservations about selling the firm now, the board came to a consensus view over the weekend that it should formalize a sales process and see what kind of value and interest there was from outside companies, said the people familiar with the matter. It isn’t clear how long the company will run the auction process, said these people.
Many of the inquiries came earlier this year after the April 5 accident at the Upper Big Branch mine near Montcoal, West Virginia. The mishap was the worst U.S. coal mining disaster in 40 years.
The company’s stock has fallen 7.5 percent since the fatal blast after surging 30 percent this year prior to the accident. Massey last month reported a net loss of $41.4 million for the third quarter, citing lower productivity amid increased regulatory scrutiny.
Coal India Ltd., the world’s largest coal producer, is considering a Massey Energy mine for its first asset purchase in the U.S., to help the state-run company meet demand from power stations and steel mills, three people with direct knowledge of the matter said this month.
Blankenship, who began his career with the company as an office manager in 1982, and is the board’s chairman, said last week that merger acquisition options will be “fully vetted” at the board meeting which began yesterday at the Greenbrier Resort in White Sulfur Springs, West Virginia.
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