Massey Energy/Alpha acquisition - Q&A |
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The combination of Massey and Alpha will create a premier coal operator in the U.S. and a global leader in metallurgical coal supply, with one of the world’s largest highest quality metallurgical coal reserves bases.
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The Massey-Alpha combination makes sense geographically, operationally and financially. Both companies have deep roots in Central Appalachia and deep experience mining in the region. The combined company will benefit from geographical and asset diversification, including operations and reserves in Central and Northern Appalachia and the Powder River Basin in Wyoming, and reserves in the Illinois Basin.
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This combination will potentially mean greater opportunities for Massey’s members within a larger network of operations (more than 110 mines combined). And for Massey communities, it represents jobs, enhanced stability and better economic prospects long term.
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The acquisition is expected to close in mid-2011, but until regulatory approvals are secured and customary closing conditions are met, both companies will continue to operate independently of and in competition with each other.
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Upon the deal’s closing, Massey stockholders will receive immediate and substantial value, as well as an opportunity to participate in the combined company's future growth. Based on stock price and market capitalization on January 28, 2011, Massey stockholders will receive a 21 percent upfront premium, as well as 46 percent ownership of the combined company.
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General Questions |
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The transaction is subject to customary regulatory approvals and the approvals of the stockholders of each of Massey and Alpha. The transaction is expected to close in mid-2011.
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Integration teams from both companies will develop a detailed, thoughtful plan to integrate the companies to ensure a smooth transition for employees and customers. Massey is fortunate that Alpha has a proven track record for integration, as evidenced by its transaction with Foundation in 2009.
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This transaction represents an opportunity for both companies to work together to create a new industry leader. It will mean a stronger organization with more capabilities and resources to withstand the many challenges facing the coal industry today. For the local communities, it represents jobs, enhanced stability and better economic prospects long term. And for both organizations’ employees, it creates an opportunity to be a world-class coal producer with an unparalleled commitment to safety and environmental stewardship.
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The combination will also benefit from geographical and asset diversification, including operations and reserves in Central and Northern Appalachia and the Powder River Basin in Wyoming, and reserves in the Illinois Basin.
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The main regulatory approval or review requirement is review under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”).
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Massey believes HSR clearance will be obtained by Alpha in a timely manner.
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For Massey, the merger will require the affirmative vote of holders of a majority of the outstanding Massey common stock. Alpha, too, must secure approval from the holders of a majority of the outstanding Alpha common stock in order to issue the Alpha stock that will be issued as merger consideration in the transaction.
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Under the terms of the agreement, at closing, Massey stockholders will receive 1.025 shares of Alpha common stock and $10.00 in cash for each share of Massey common stock (other than any shares owned by Alpha or Massey, which will be cancelled). Stockholders who have properly exercised and perfected appraisal rights under Delaware law will not receive this. This represents a 21% upfront premium, based on the closing prices of Massey and Alpha stock as of January 28, 2011.
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Based on the capitalization of Massey and Alpha as of January 28, 2011, Massey stockholders will own 46% of the combined company upon closing.
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According to the presentation Alpha made January 31, the companies expect approximately $150 million in annual savings by mid-year 2012 through:
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Selling, general and administrative expenses (SG&A) and sourcing
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Marketing
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Operations
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Yes, until the closing of the transaction, Massey will continue paying quarterly dividends in the ordinary course. After the closing, stockholders of the combined company will receive dividends in accordance with Alpha’s dividend policies.
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Alpha has indicated that the current Alpha Board of Directors will remain in place.
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For Customers |
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The customer overlap of Massey and Alpha is fairly limited. There is an expectation that customers will support the transaction and the enhanced products, efficient and reliable service, and growing production that it should enable.
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For Employees |
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Alpha has assured Massey that the lessons Alpha learned from another recent acquisition and integration will help make the process with Massey even smoother. It’s too early to talk specifically about how the integration process might impact specific individuals, as both companies are focused on getting the transaction approved by regulatory agencies, both companies’ stockholders, and preparing for the integration.
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It is important to stress that, as Alpha has also publicly stated, this proposed transaction is primarily about growth, and Alpha thinks highly of Massey’s miners. The miners who work at both Massey and Alpha are skilled, dedicated and innovative, and Alpha is convinced that Massey’s miners will benefit greatly from the expanded opportunities and resources available as part of a larger and stronger organization, with greater long-term growth prospects.
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Massey members can expect to continue to receive highly competitive wages and benefits packages. Prior to agreeing to this transaction, Massey determined that Alpha has a benefits package similar to its own. During the integration process, Alpha will determine how best to integrate them. This may require some changes, and members will receive advance notice of any changes that may be made. Again, Alpha has assured us that Massey members will continue to receive competitive compensation and benefit packages that serve the needs of the employees and their families.
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During the transition, we commit to keeping our members informed about the progress of the merger. Massey will provide our members with regular updates and will communicate details to our members as they become known to Massey.
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No. While a few small teams have started planning and will be in discussions with their counterparts at Alpha, the integration process will not start until after the transaction closes. Until that time, it is important to remember that Massey and Alpha will continue to operate as independent and competing companies.
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At this point, the best and most important thing is to remain focused on business as usual. Until the transaction closes, Massey and Alpha will continue to operate as independent and competing companies; as such, Massey should do all it can to ensure that it delivers on commitments to customers.
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Media |
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Communications will be ongoing, both leading up to the closing date and after the closing date. If reporters have questions that are not answered here, we respectfully ask that those individuals check the websites for both Alpha and Massey. Each will feature a section that discusses the merger on their respective homepages. Those with additional questions should feel free to contact Massey via email at: media@masseyenergyco.com.
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