Thu Mar 10, 2011 1:18am GMT
* Offer raised to A$16.50 per share from A$16
* Rio maintains 50% acceptance limit for bid to go ahead
* Riversdale shares fall, 9 percent below offer value
* Rio says offer is final if no competing bids
MELBOURNE, March 10 (Reuters) - Global miner Rio Tinto raised its offer for Mozambique-focused coal miner Riversdale Mining to $3.9 billion in a final bid to woo key shareholders who have held up the deal and gain control of coveted coal assets.
Investors doubted the move would be enough to secure the 50.1 percent acceptances Rio wants and sent Riversdale's shares down as much as 2.4 percent.
"The market's clearly a bit skeptical that it will get across the line," said Peter Chilton, an analyst at Constellation Capital Management, which owns shares in Rio Tinto.
Rio Tinto raised its offer price by 3 percent to A$16.50 per share on Thursday and extended the offer period for the third time, to April 1, but said the new offer was its final one if there were no competing offers.
Standing in Rio's way are India's Tata Steel , the world's No. 7 steelmaker, and top Brazilian steel producer CSN , who have increased their stakes in Riversdale since the bid and now hold a combined 47 percent.
Without their support, Rio would need nearly 100 percent acceptances from the rest of Riversdale's shareholders to get majority control.
"It's going to be quite hard," Chilton said.
As of March 4, Rio Tinto only had acceptances on 17.9 percent of Riversdale's shares.
Tata Steel and CSN have both said they are mainly interested in securing coking coal from Riversdale. Tata, which already has a stake in Riversdale's Benga coking coal project in Mozambique, has said it was talking to Rio about a range of options.
CSN has not publicly revealed its intention over the Riversdale stake or about its possible talks with Rio Tinto.
Analysts said the two companies would probably like to see Rio Tinto, with deeper pockets and more technological skills than Riversdale, developing Riversdale's Mozambique mines and infrastructure.
"There is no question that Rio Tinto's expertise is crucial to overcoming the development challenges of Riversdale's projects," Rio Tinto Energy chief executive Doug Ritchie said in a statement.
If Rio did not take over Riversdale, shareholders would be likely to face big equity raisings by Riversdale to help fund the development of its coking coal projects.
"It's difficult to see that Tata Steel and the Brazilians really want to be involved in what would be very expensive coal development projects," Chilton said.
Complicating talks is China's third-largest steel maker, Wuhan Iron and Steel Corp , which had an agreement to buy a 40 percent stake in Riversdale's Zambeze coal project in Mozambique, with rights to coal supply from Zambeze and Riversdale's other key project, Benga.
Riversdale's shares last traded down 0.5 percent at A$15.05, about 9 percent below the offer price, after touching a low of A$14.77. Rio's shares fell 1.5 percent in a broader market that was down 0.8 percent. (Reporting by Sonali Paul and Balazs Koranyi; Editing by Ed Davies and Dhara Ranasinghe)
Showing posts with label shareholders. Show all posts
Showing posts with label shareholders. Show all posts
Thursday, March 10, 2011
Riversdale CEO sees growing institutional support for Rio Tinto offer
Thursday 10 March 2011, 10:17 AM
MELBOURNE (Reuters) - Institutional shareholders in Riversdale Mining (ASX:RIV.AX) are moving toward backing global miner Rio Tinto's sweetened A$3.9 billion takeover offer for the Mozambique-focused coal miner, Riversdale's chief executive said on Thursday.
Rio Tinto raised its offer to A$16.50 a share on Thursday in a final bid to woo key shareholders who have held up the deal, and extended the offer for a third time, to April 1.
"I can say that from the institutional calls that I've made in the last few hours, that there's some growing support for Rio Tinto," Riversdale Chief Executive Steve Mallyon told Reuters.
(Reporting by Sonali Paul; Editing by Balazs Koranyi,sourced:Thomson Reuters)
Monday, March 7, 2011
BHP Billiton's buy back beat-up
Mon, Mar 07, 2011 6:24 PM
By Stephen Bartholomeusz
BHP Billiton lodged the documentation for its proposed $US5 billion off-market buy-back with the ASX today. The buy-back, announced last month, has already attracted the usual criticism.
During the financial crisis the debate about the equity of off-market buy-backs died away, for the obvious reasons that there weren’t any because companies were conserving their capital. Woolworths conducted one last year, but BHP Billiton’s will be easily the largest and more than twice the size of the $US2.25 billion buy-back it conducted in 2006.
The Australian Centre for Financial Studies’ Kevin Davis, in a discussion paper released on Friday, said that between 1996 and 2008 there were more than 80 off-market buy-backs that returned about $27 billion of cash to participating shareholders.
It was towards the end of that period that the volume of criticism of them mounted to the point that the federal government directed the Board of Taxation to review the arrangements for buy-backs in 2009. While the board presented Peter Costello with recommendations for reform that would have materially reduced their appeal, nothing happened.
The BHP Billiton buy-back will be conducted as a tender. Essentially shareholders compete to be involved by bidding at a discount to the market price.
They are prepared to sell their shares for less than the market price because when they are paid for their shares they are deemed to have received a combination of a (small) capital amount and a franked dividend. Thus they not only get franked income but a significant capital loss to set against profits elsewhere.
That makes the buy-backs particularly attractive to shareholders with zero or low tax rates, like superannuation funds or charities, and quite unattractive to shareholders on the top marginal tax rate.
Professor Davis summed up the arguments against off-market buy-backs by saying that the tax-based discrimination against shareholders on high tax rates had led to concerns about the equitable treatment of shareholders and the consistency of the buy-backs with Corporations Law requirements that all shareholders should be treated equally.
"In effect, the argument is that valuable franking credits are being siphoned to one group of shareholders to the detriment of others."
As Professor Davis acknowledged, however, there are benefits for non-participating shareholders because the reduced capital base means enhanced performance statistics – earnings per share, cash flow per share, asset backing and return on equity. In effect their share of the company’s earnings and assets is increased and that ought to be reflected in a relatively higher share price.
That led him to refer to the other big criticism of the buy-backs, that both participating and non-participating shareholders benefit at the expense of the taxpayer. Their critics refer to off-market buy-backs as taxpayer-funded rorts.
They are not that. Companies accumulate franking credits because they have paid tax. The objective of the dividend imputation system was to remove the previous double-taxation of profits at the corporate and individual levels.
The system, however, wasn’t and isn’t pure because it excluded non-Australian shareholders and contains prohibitions against the "streaming" of credits so that they can be devoted purely to Australian shareholders – there is significant wastage of the credits for local company taxes that have been paid.
The buy-backs are a mechanism for selling those excess credits to those who value them most, which in turn means that all shareholders, including foreign shareholders, will get some benefit from the excess credits being distributed. That wouldn’t happen if BHP Billiton had chosen to pay a special dividend rather than conduct a buy-back.
Whether it is the local shareholder versus the foreign shareholder, or low-tax rate shareholders versus those on the top marginal tax rate, and whether the talking point is dividends or buy-backs, the tax system means that any distribution or capital management program will have some inequitable aspects.
Buy-backs, because the participants tend to capitalise much of the benefit in the discounts they bid (in BHP’s case the discount can be up to 14 per cent) are probably more equitable for all shareholders than other forms of distribution.
That limit on the discount allowed has been imposed by the Australian Taxation Office, which impose (somewhat arbitrarily) a number of guidelines for what it will accept in buy-backs when Commonwealth Bank was a little too aggressive in structuring a $650 million buy-back in 1997. The details of individual buy-backs are negotiated with the ATO.
If buy-backs were a rort, one assumes that the ATO would have done something about them, or that successive governments would have acted on the recommendations of the Board of Taxation and made them less attractive. It is not as though the government, the ATO and the Australian Securities and Investment Commission are unaware of the controversies.
In fact the existence of the franking credits says that Australian company taxes have been paid and all the buy-back does is bring forward the ability to use excess credits and deploy them more efficiently and to the benefit of the entire shareholder base – Australian and foreign – that, given they are an asset of the company, owns them.
Professor Davis says the revival of interest in the buy-backs means the tax arrangement should be clarified and debates about equitable treatment of shareholders resolved. Perhaps he’s right, although the popularity and success of the buy-backs and the reality that the ATO and governments have okayed them for more than a decade and a half would suggest there’s nothing much to be clarified or resolved.
During the financial crisis the debate about the equity of off-market buy-backs died away, for the obvious reasons that there weren’t any because companies were conserving their capital. Woolworths conducted one last year, but BHP Billiton’s will be easily the largest and more than twice the size of the $US2.25 billion buy-back it conducted in 2006.
The Australian Centre for Financial Studies’ Kevin Davis, in a discussion paper released on Friday, said that between 1996 and 2008 there were more than 80 off-market buy-backs that returned about $27 billion of cash to participating shareholders.
It was towards the end of that period that the volume of criticism of them mounted to the point that the federal government directed the Board of Taxation to review the arrangements for buy-backs in 2009. While the board presented Peter Costello with recommendations for reform that would have materially reduced their appeal, nothing happened.
The BHP Billiton buy-back will be conducted as a tender. Essentially shareholders compete to be involved by bidding at a discount to the market price.
They are prepared to sell their shares for less than the market price because when they are paid for their shares they are deemed to have received a combination of a (small) capital amount and a franked dividend. Thus they not only get franked income but a significant capital loss to set against profits elsewhere.
That makes the buy-backs particularly attractive to shareholders with zero or low tax rates, like superannuation funds or charities, and quite unattractive to shareholders on the top marginal tax rate.
Professor Davis summed up the arguments against off-market buy-backs by saying that the tax-based discrimination against shareholders on high tax rates had led to concerns about the equitable treatment of shareholders and the consistency of the buy-backs with Corporations Law requirements that all shareholders should be treated equally.
"In effect, the argument is that valuable franking credits are being siphoned to one group of shareholders to the detriment of others."
As Professor Davis acknowledged, however, there are benefits for non-participating shareholders because the reduced capital base means enhanced performance statistics – earnings per share, cash flow per share, asset backing and return on equity. In effect their share of the company’s earnings and assets is increased and that ought to be reflected in a relatively higher share price.
That led him to refer to the other big criticism of the buy-backs, that both participating and non-participating shareholders benefit at the expense of the taxpayer. Their critics refer to off-market buy-backs as taxpayer-funded rorts.
They are not that. Companies accumulate franking credits because they have paid tax. The objective of the dividend imputation system was to remove the previous double-taxation of profits at the corporate and individual levels.
The system, however, wasn’t and isn’t pure because it excluded non-Australian shareholders and contains prohibitions against the "streaming" of credits so that they can be devoted purely to Australian shareholders – there is significant wastage of the credits for local company taxes that have been paid.
The buy-backs are a mechanism for selling those excess credits to those who value them most, which in turn means that all shareholders, including foreign shareholders, will get some benefit from the excess credits being distributed. That wouldn’t happen if BHP Billiton had chosen to pay a special dividend rather than conduct a buy-back.
Whether it is the local shareholder versus the foreign shareholder, or low-tax rate shareholders versus those on the top marginal tax rate, and whether the talking point is dividends or buy-backs, the tax system means that any distribution or capital management program will have some inequitable aspects.
Buy-backs, because the participants tend to capitalise much of the benefit in the discounts they bid (in BHP’s case the discount can be up to 14 per cent) are probably more equitable for all shareholders than other forms of distribution.
That limit on the discount allowed has been imposed by the Australian Taxation Office, which impose (somewhat arbitrarily) a number of guidelines for what it will accept in buy-backs when Commonwealth Bank was a little too aggressive in structuring a $650 million buy-back in 1997. The details of individual buy-backs are negotiated with the ATO.
If buy-backs were a rort, one assumes that the ATO would have done something about them, or that successive governments would have acted on the recommendations of the Board of Taxation and made them less attractive. It is not as though the government, the ATO and the Australian Securities and Investment Commission are unaware of the controversies.
In fact the existence of the franking credits says that Australian company taxes have been paid and all the buy-back does is bring forward the ability to use excess credits and deploy them more efficiently and to the benefit of the entire shareholder base – Australian and foreign – that, given they are an asset of the company, owns them.
Professor Davis says the revival of interest in the buy-backs means the tax arrangement should be clarified and debates about equitable treatment of shareholders resolved. Perhaps he’s right, although the popularity and success of the buy-backs and the reality that the ATO and governments have okayed them for more than a decade and a half would suggest there’s nothing much to be clarified or resolved.
Friday, February 25, 2011
Coal India pays Rs1,989.65 crore interim dividend news
25 February 2011State-owned mining giant Coal India Limited (CIL) today paid Rs1,989.65 crore as interim dividend for fiscal 2010-11 to the government. This works out to Rs3.50 per RS10 share or 35 per cent return on the Government of India's holding in the PSU.
CIL chairman and managing director Partha S Bhattcharyya handed over the dividend cheque, constituting 90 per cent of the total dividend payout, to coal minister Sriprakash Jaiswal.
CIL distributed the remaining 10 per cent of the dividend amount to other shareholders.
In 2009-10, CIL paid Rs2,210 crore as final dividend, which was 35 per cent of the paid-up equity. The interim dividend paid this fiscal to GoI and other shareholders is equivalent to the final dividend that was paid for the whole of last year.
The final dividend for 2010-11 would be paid after the finalisation of accounts of the fiscal.
CIL chairman and managing director Partha S Bhattcharyya handed over the dividend cheque, constituting 90 per cent of the total dividend payout, to coal minister Sriprakash Jaiswal.
CIL distributed the remaining 10 per cent of the dividend amount to other shareholders.
In 2009-10, CIL paid Rs2,210 crore as final dividend, which was 35 per cent of the paid-up equity. The interim dividend paid this fiscal to GoI and other shareholders is equivalent to the final dividend that was paid for the whole of last year.
The final dividend for 2010-11 would be paid after the finalisation of accounts of the fiscal.
Moly Mines to produce 820,000 tonnes iron ore in 2011
Fri Feb 25, 2011 3:51pm GMT* Says loan talks with Hanlong Group, syndicate resume
* Shares up 11 percent
Feb 25 (Reuters) - Moly Mines Ltd expects to produce 820,000 tonnes of iron ore in 2011 and has resumed talks with China-based Hanlong Group and a bank syndicate for a loan, sending its shares up 11 percent.
Moly Mines began commercial production at its Spinifex Ridge project in Western Australia in November and said the production rate at the mine is seen to touch 1 million tonnes a year in the second quarter.
The miner said it has resumed talks with Hanlong Group, its controlling shareholder, and a banking syndicate for a $466 million project finance loan.
The company said Hanlong was working to get a commitment from China Export and Import Bank to match the one it secured from China Development Bank in January for $250 million.
Shares of the Toronto-based company rose 11 percent to C$1.09 in early trading on Friday on the Toronto Stock Exchange.(Reporting by Abhiram Nandakumar, Sourced:Thomson Reuters)
Moly Mines began commercial production at its Spinifex Ridge project in Western Australia in November and said the production rate at the mine is seen to touch 1 million tonnes a year in the second quarter.
The miner said it has resumed talks with Hanlong Group, its controlling shareholder, and a banking syndicate for a $466 million project finance loan.
The company said Hanlong was working to get a commitment from China Export and Import Bank to match the one it secured from China Development Bank in January for $250 million.
Shares of the Toronto-based company rose 11 percent to C$1.09 in early trading on Friday on the Toronto Stock Exchange.(Reporting by Abhiram Nandakumar, Sourced:Thomson Reuters)
Atlas Iron share in Giralia exceeds 90 percent milestone
Friday, 25 February 2011Australian iron ore miner Atlas Iron Limited has announced that it holds 91.22 percent of the voting rights in fellow Australian iron ore mining company Giralia as of February 25.
As SteelOrbis previously reported, according to a statement made on February 4, Atlas had extended its approximately AU$828 million (US$831 million) off-market takeover bid for a 100 percent stake in Giralia Resources Limited which also operates in Australia's Pilbara region. Accordingly, the offer was extended until 5.00 pm, February 28, 2011 from February 11, 2011. The process started on January 11, 2011 with an acceptance condition of 90 percent. The company then changed its offer to unconditional.
The offer has been recommended by the board of Giralia, with the merger of the two Pilbara mining companies to create a group worth AU$2.5-3 billion.
"The two companies have deposits that either join or are very close to each other at Mt Webber, McPhee Creek, Beebyn Range and Western Creek. This merger is a great way to grow production, reduce operating costs, maximize cash flows and deliver significant value for all shareholders," Atlas' managing director David Flanagan commented in a previous statement.
As SteelOrbis also previously reported, Atlas had agreed to buy Perth-based metals developer Aurox Resources on March 10 last year in a deal worth AU$149 million at that date. The merger was completed by the end of August.
Tags: iron ore , raw mat , Australia , Oceania , investments , M&A , mining , AtlasAs SteelOrbis previously reported, according to a statement made on February 4, Atlas had extended its approximately AU$828 million (US$831 million) off-market takeover bid for a 100 percent stake in Giralia Resources Limited which also operates in Australia's Pilbara region. Accordingly, the offer was extended until 5.00 pm, February 28, 2011 from February 11, 2011. The process started on January 11, 2011 with an acceptance condition of 90 percent. The company then changed its offer to unconditional.
The offer has been recommended by the board of Giralia, with the merger of the two Pilbara mining companies to create a group worth AU$2.5-3 billion.
"The two companies have deposits that either join or are very close to each other at Mt Webber, McPhee Creek, Beebyn Range and Western Creek. This merger is a great way to grow production, reduce operating costs, maximize cash flows and deliver significant value for all shareholders," Atlas' managing director David Flanagan commented in a previous statement.
As SteelOrbis also previously reported, Atlas had agreed to buy Perth-based metals developer Aurox Resources on March 10 last year in a deal worth AU$149 million at that date. The merger was completed by the end of August.
(sourced:steelorbis)
Monday, February 21, 2011
Usiminas shareholders stave off potential takeover with new long-term accord
Monday, 21 February 2011
Rio de Janeiro, Brazil-based steelmaker Usinas Siderurgicas de Minas Gerais SA (Usiminas), announced Friday that in order to prevent a potential takeover bid by industry rival Companhia Siderurgica Nacional (CSN), its controlling shareholders, led by Nippon Steel Corp., have set up a new long-term accord "to demonstrate the stability" of the company's current shareholding structure.
CSN recently purchased stakes in Usiminas, which prompted the action. According to a statement from Usiminas, the company will be governed until 2031 by controlling shareholders, including: Nippon Steel Corp.; Nippon Usiminas Co., Ltd.; Mitsubishi Corp. do Brasil S.A.; Metal One Corp.; Votorantim Industrial S.A.; Camargo Correa S.A.; Construcoes e Comercio Camargo Correa S.A.; and Camargo Correa Investimentos em Infra-estrutura S.A. Combined, the controlling companies hold 53.7 percent of Usiminas' voting capital. After 2031, the new accord will be renewable in five-year periods. The previous accord was due to expire in 2016.
"The aim is to demonstrate to other stakeholders in the company and to the market the stability of the control group and, consequently, assure the company's continuing growth and development," said Ronald Seckelmann, Vice President of finances and investor relations for Usiminas.
(sourced:steelorbis)
CSN recently purchased stakes in Usiminas, which prompted the action. According to a statement from Usiminas, the company will be governed until 2031 by controlling shareholders, including: Nippon Steel Corp.; Nippon Usiminas Co., Ltd.; Mitsubishi Corp. do Brasil S.A.; Metal One Corp.; Votorantim Industrial S.A.; Camargo Correa S.A.; Construcoes e Comercio Camargo Correa S.A.; and Camargo Correa Investimentos em Infra-estrutura S.A. Combined, the controlling companies hold 53.7 percent of Usiminas' voting capital. After 2031, the new accord will be renewable in five-year periods. The previous accord was due to expire in 2016.
"The aim is to demonstrate to other stakeholders in the company and to the market the stability of the control group and, consequently, assure the company's continuing growth and development," said Ronald Seckelmann, Vice President of finances and investor relations for Usiminas.
(sourced:steelorbis)
Tags: Brazil , South America , M&A, Nippon Steel corp, CSN, Nippon Usiminas Co.,Mitsubishi Corp., do Brasil S.A.,Metal One Corp., Votorantim Industrial S.A., Camargo Correa S.A., Construcoes e Comercio Camargo Correa S.A., Camargo Correa Investimentos em Infra-estrutura S.A.
Tuesday, February 1, 2011
Protest voters threaten cash rebellion at Rio and BHP
The bosses of Britain's biggest mining companies face embarrassing protest votes at their annual meetings unless they give assurances to investors that multi-billion-pound acquisitions are not on the cards for 2011.By Louise Armitstead, 31, Jan 2011
Institutional investors have warned Rio Tinto and BHP Billiton that they will vote against the re-election of directors if they are not satisfied that the companies are committed to handing cash back. The shareholders, some of whom have big holdings in both companies, are concerned that the miners will use their strong balance sheets to pursue megadeals.
Rio is under particular pressure to return cash. In 2009 the company tapped its investors in a $15.2bn (£9.6bn) rights issue following the collapse of its $19.5bn deal with Chinalco, the Chinese state-owned group. Investors are demanding clear direction in the company's interim results statement due on February 10.
Rio's net debt now is $27bn lighter than it was at the end of 2009. As a result, investors are nervous that Tom Albanese, chief executive, wants to use the strong balance sheet to fund a big strategic acquisition. The company is currently in talks with Australian coalminer Riversdale over an agreed $3.9bn bid.
Rio approved major capital projects totalling $5.5bn during the fourth quarter last year. The company was lambasted by investors after it bought Canadian aluminium producer Alcan for $38bn in 2007 in a deal that severely damaged its balance sheet at the onslaught of the financial crisis.
BHP is expected to give a detailed update of its strategic plans at its interim results on February 16. In a bid to placate the shareholders, the company is thought to be planning to explain its intention both in terms of the balance sheet and its appetite for deals. The company announced its intention to do a £4.2bn share buy-back in November.
But for some investors, it is still not enough.
As revealed yesterday in The Sunday Telegraph, a group of shareholders has written letters to the boards of both companies to demand commitments to multi-billion-pound share buy-backs and dividends.
One of BHP's top 10 shareholders told the newspaper: "Frankly, after the Potash debacle, we are not too enamoured with BHP's bid ambitions. It was expensive and ambitious and even then Marius Kloppers [chief executive of BHP] told us that we wouldn't see the benefits of the deal for as long as 10 years. This is not the sort of thing we want him to spend the money on."
Last week BHP was rumoured to be plotting a bid for BG Group. Analysts at Exane BNP Paribas said a takeover would allow BHP to revitalise its oil and gas arm. (sourced:telegraph.co.uk)
Sunday, January 30, 2011
Alpha Natural Agrees to Buy Massey Energy for $7.1 Billion in Cash, Stock
By Mario Parker and Zachary R. Mider
Sunday, Jan 29, 2011
Alpha Natural Resources Inc., the third-biggest U.S. coal producer, agreed to buy Massey Energy Co. for about $7.1 billion in cash and stock, gaining the largest coal company in the U.S. Central Appalachian region.
Massey shareholders will receive 1.025 Alpha Natural shares plus $10 cash for each share held, the companies said in a statement yesterday. The bid values Massey at $69.33 a share, 21 percent more than Massey’s price at the close of trading Jan. 28. Massey has $1.63 billion in debt, according to Bloomberg data.
The combination will give the new company more than 110 mines and coal reserves of about 5 billion tons, and creates the world’s third-largest metallurgical coal producer behind BHP Billiton-Mitsubishi Alliance, known as BMA, and Teck Resources Ltd. It will be the second-largest U.S. coal company by sales, with almost 14,000 employees.
“We’ve always thought the combination between our two companies was strategic, transformational and compelling,” Alpha Natural Chief Executive Officer Kevin Crutchfield said in a telephone interview yesterday. “We went into the process with an eye toward winning, and, at the end of the day we did emerge victorious and we’re absolutely delighted that we did.”
Alpha Natural will own 54 percent of the company, and Richmond, Virginia-based Massey will own the remaining 46 percent, according to the statement. Both companies’ boards have approved the transaction, they said.
Alpha and Arch
Alpha Natural won Massey over a competing proposal from St. Louis-based Arch Coal Inc., according to two people with knowledge of the talks.
Alpha Natural, the largest U.S. metallurgical coal producer, has operations in Virginia, West Virginia, Kentucky, Pennsylvania and in Wyoming’s Powder River Basin. The Abingdon, Virginia-based company bought Foundation Coal Holdings Inc. for $2 billion in July 2009 to gain access to the low-cost thermal coal reserves in Wyoming, and controls about 2.3 billion tons of reserves.
Massey has about 2.8 billion tons of reserves, 1.3 billion of which is of the metallurgical or coking coal used to produce steel. Prices for steelmaking coal may surge 78 percent to a record $400 a metric ton for the three-month contract starting April 1, amid flooding in Queensland, Australia, which has disrupted supply, Bank of America Merrill Lynch said in a Jan. 25 report.
Mine Disaster
The company owns the Upper Big Branch mine near Montcoal, West Virginia, where 29 people died in an April 5 explosion, the worst U.S. coal mining disaster in 40 years. Massey has posted consecutive losses since the accident, citing associated costs and increased regulatory scrutiny.
Crutchfield said he will remain CEO of the combined company, while Alpha Natural’s Michael Quillen keeps his job as chairman and Kurt Kost continues in his role as president of Alpha.
Massey Chief Executive Baxter Phillips will remain with Alpha as an adviser, Crutchfield said.
“Baxter will be staying on with us in an advisory-type capacity,” Crutchfield said. “He will play a very key role in the integration process as well as other key business matters.”
Alpha executives have coveted Massey since at least 2007, when the companies discussed a stock merger, according to the two people familiar with the talks. The previous year, Massey had announced it was exploring alternatives after activist hedge fund Third Point LLC, run by Daniel Loeb, won two board seats and pressed for a sale.
Blankenship’s Opposition
Massey’s chief executive officer at the time, Don Blankenship, opposed the Alpha combination, the people said, and ultimately succeeded in keeping the company independent. Loeb and his colleague quit, chiding the board for failing “to follow through with an attractive business combination with a competitor,” according to a regulatory filing.
Alpha Natural went on to agree to a sale to iron ore producer Cleveland-Cliffs Inc. in 2008 that fell through and then it bought Foundation Coal.
The company approached Massey again last year, a few months after the Upper Big Branch explosion, and followed up with an unsolicited, written takeover proposal, the people said. Massey’s board entered into talks with Alpha and other potential acquirers.
“We’ve had discussions off and on for several years, but they reached a point of earnestness, call it, the last few months,” Crutchfield said yesterday.
Coal Premiums
The average premium for coal-industry deals announced in 2010 was 26 percent, according to data compiled by Bloomberg. Walter Energy Inc., a southern Appalachia producer of steelmaking coal, agreed to buy Canada’s Western Coal Corp. last month for C$3.3 billion ($3.3 billion) to add reserves and boost production.
Massey has about 7,000 employees and has been operating for more than 94 years and started with the Massey family selling coal door-to-door via horse-drawn wagon. St. Joe Minerals acquired a majority interest in 1974. Six years later, St. Joe and Royal Dutch Shell Plc formed Massey Coal Partnership, according to the company’s website.
Fluor Corp. bought St. Joe Minerals, reorganizing Massey into a subsidiary. Massey completed a reverse spinoff from Fluor in 2000.
Former CEO
Phillips, who has been with the company for 30 years, became Massey’s chief executive officer on Dec. 31 after Blankenship retired. Blankenship, who emerged as the face of the company in public disagreements with U.S. regulators following the Montcoal accident, had been with Massey for 28 years.
Blankenship, who began his career with the company as an office manager in 1982, had expressed reservations about the company’s potential sale. When he became president in 1990 Massey had about 700 million tons of coal, he has said. Under his management it mined 763 million tons of coal and he boosted its reserves to the 2.8 billion it currently holds.
Massey rose $2.84, or 5.2 percent, to $57.23 in New York Stock Exchange composite trading Jan. 28. The shares had fallen 35 percent since the fatal blast before surging on an Oct. 18 Wall Street Journal report that it was weighing a sale.
Alpha said that it received commitments for $3.3 billion in financing from Morgan Stanley and Citigroup Inc. and that it will use some of it to refinance both companies debt.
Morgan Stanley is the lead financial adviser for Alpha, in addition to Citi and Cleary Gottlieb Steen & Hamilton LLP is providing legal counsel.
Massey is advised by Perella Weinberg Partners LP and UBS Securities LLC. Cravath, Swaine & Moore LLP and Troutman Sanders LLP are Massey’s legal counsel. (Sourced:Bloomberg.com)
Subscribe to:
Posts (Atom)
Posts
