Miner Massey shares, others rise on acquisition talk

NEW YORK Mon Jan 31, 2011 11:54am EST

NEW YORK (Reuters) - Shares of U.S. coal mining companies rose on Monday on speculation of a wave of consolidation in the industry after Alpha Natural Resources agreed to buy Massey Energy in a $7 billion deal.

Meanwhile, Alpha's chief executive Kevin Crutchfield said the acquisition of Massey, which will create the world's third largest producer of steel-making metallurgical coal, is expected to boost earnings by 2012.

He said that in a couple of years the combined company could be producing 28 million to 30 million tons of metallurgical coal, which is in high demand, especially from China and other emerging economies.

Analyst Jeremy Sussman of Brean Murray Carret & Co noted that the deal was the second recent one in the metallurgical coal field, following Walter Energy's $3.3 billion deal to buy Canada's Western Coal.

"Investors are now likely to focus on the question, 'Who is next?'" Sussman wrote in a research note.

In morning trading on the New York Stock Exchange, shares of Massey, whose profits have dropped sharply since 29 miners died in an explosion at its Upper Big Branch mine in West Virginia last April, rose over 10 percent to $63.15. Alpha's stock fell more than 7 percent to $53.74.

In the deal announced on Saturday, Alpha agreed to buy Massey, whose shareholders will receive 1.025 Alpha share for each Massey share in addition to $10 a share in cash, for a value of about $69.33 a share. That represents a 21 percent premium over Massey's closing share price of $57.23 on Friday.

Shares in other miners rose. Arch Coal, which had been in the hunt to acquire Massey, was up 3.5 percent at $34.39. Peabody Energy was up 2.7 percent at $62.74, Consol Energy was 3.6 percent higher at $49.66 and Walter Energy was up 2.7 percent at $130.41.

Two companies that have been mentioned as possible acquisition targets also rose -- International Coal Group was up 3.49 percent at $9.17 and Patriot Coal was 3.6 percent higher at $26.39.

(Reporting by Steve James; Editing by Derek Caney, Dave Zimmerman and Gunna Dickson)