Shareholders overwhelmingly approved coal producer Alpha Natural Resources' $7.1 billion takeover of struggling rival Massey Energy Co. on Wednesday, the companies said.
Alpha immediately began absorbing Massey, replacing the company's sign on its West Virginia headquarters and filing at least 18 documents with the Securities and Exchange Commission cancelling Massey shares after the deal closed.
"Our goal is to run the combined company in the same manner that we've operated Alpha," Chief Executive Kevin Crutchfield told The Associated Press. "We'll see improved safety performance, improved levels of environmental stewardship."
Massey's safety record has been the focus of renewed scrutiny since 29 miners died in an explosion at its Upper Big Branch mine in southern West Virginia. The April 5, 2010 tragedy is the deadliest at a U.S. mine since 1970 and remains the subject of ongoing civil and criminal investigations. Massey also has a checkered environmental record and paid a record $20 million fine for alleged pollution violations to the Environmental Protection Agency in 2008.
Crutchfield promised Alpha will do better. "Judge us by what happens from this day forward," he said.
Alpha didn't have access to Massey internal information about the explosion before the deal closed. Crutchfield said the company needs to study that information to get a better understanding of what happened. Federal regulations require Upper Big Branch's owner to produce its own report.
The deal overcame last-minute legal challenges from a small group of institutional investors who charged that the sale was designed to protect Massey officers and directors from liability for the explosion, not to benefit shareholders. Courts in Delaware and West Virginia on Tuesday declined to issue orders delaying Massey shareholders from voting. Those lawsuits and other litigation are still pending.
The combination transforms Alpha from a good-sized company into the world's third-largest producer of metallurgical coal, a key fuel for manufacturing steel. Abingdon, Va.-based Alpha aims to capitalize on strong world demand, which has pushed prices above $300 or more a ton. That's roughly triple the price of Appalachian coal used to generate electricity.
The combined companies sold 102.2 million tons of steam coal and 20.1 million tons of metallurgical coal last year. The deal is expected to give Alpha a 29 percent share of the U.S. supply of metallurgical coal.
Combined, the companies have nearly 14,000 employees, 5 billion tons of coal reserves and more than 180 mines and processing plants in Kentucky, Pennsylvania, Virginia, West Virginia and Wyoming. Combined, the companies should save more than $200 million a year, Crutchfield said.
Alpha began pursuing Massey shortly after the Upper Big Branch explosion.
The blast wreaked havoc with the company's business. Massey has reported four consecutive quarterly losses since the explosion. It has struggled with the abrupt retirement of high-profile Chief Executive Don Blankenship, turnover rates that topped 20 percent at times and a crackdown on problem mines by federal regulators.
Blankenship left in December and Massey accepted Alpha's bid of 1.025 shares of its stock for each share of Massey, plus $10 per share in cash the following month.
Shareholders liked the deal: More than 99 percent of Richmond, Va.-based Massey's shareholder voted in favor. Alpha won 98 percent of the votes from its shareholders.
"It's been a tough slog to get to this point," Crutchfield said. "It was a resounding vote."
Alpha meticulously outlined its plans for integrating the companies over the past four months. Starting Wednesday, Alpha will start training Massey workers in its philosophy. The company's Running Right program allows broad input on safety and operating issues from rank-and-file employees and includes regular observation of workers, among other things.
"We have close to 600 training sessions scheduled," Crutchfield said.
The deal ends a long history for Massey. Coal broker A.T. Massey created the company bearing his name in 1920. Massey was sold in 1974 to St. Joe Minerals, which later formed a partnership with Royal Dutch/Shell Group in 1980. A year later, Massey Coal Partnership was purchased by Fluor Corp. Massey Energy was created in 2000 when Fluor spun off its coal holdings as a separate public company under Blankenship.
Alpha has a much shorter history. It was founded in 2002 and went public three years later. It grew quickly into one of the industry's largest companies with a series of smaller acquisitions and the $1.4 billion takeover of rival Foundation Coal Holdings in July 2009.