Massey sale more likely after Blankenship leaves, analyst says
CHARLESTON, W.Va. -- A Wall Street analyst is predicting that the impending retirement of Massey Energy Co.'s longtime chief executive will increase the odds the troubled coal company will be acquired.
Don Blankenship's departure will remove the strongest advocate for remaining an independent company from Virginia-based Massey's board, Stifel, Nicolaus & Co. analyst Paul Forward said in a report to investors.
Massey announced last Friday that Blankenship would retire Dec. 31 and be succeeded by President Baxter Phillips Jr.
Massey has been under pressure to remove Blankenship since an explosion killed 29 miners at its Upper Big Branch Mine in Raleigh County. The explosion is the deadliest U.S. coal mine disaster in decades and the subject of criminal and civil investigations.
Massey announced plans to conduct a strategic review of ways to increase shareholder value last month and hired Perella Weinberg Partners LP and Cravath, Swaine & Moore LLP last month to act as financial and legal advisers.
"We believe the events of the past few weeks increase the likelihood that the company's ongoing strategic review will lead to a sale of the company at favorable terms," Forward wrote in the report issued Wednesday. "We believe the retirement of Mr. Blankenship removes the strongest voice on Massey's board in support of the firm remaining independent."
Former director Daniel Loeb, founder of New York hedge fund Third Point, claimed in his letter of resignation in 2007 that Massey's board declined a proposed merger because the deal would have required Blankenship to leave.
Recent reports suggest Massey is a possible takeover target for rivals such as Alpha Natural Resources Inc. and global steel conglomerate ArcelorMittal SA. Abingdon, Va.-based Alpha is the leading U.S. producer of metallurgical coal used to make steel, while ArcelorMittal already owns several metallurgical coal mines in Appalachia.
Richmond, Va.-based Massey has struggled with two money-losing quarters since the explosion, which prompted a regulatory crackdown that the company blames for cutting production.
Forward said Phillips will try mending fences with government regulators.
Blankenship has engaged in a war of words with the U.S. Mine Safety and Health Administration since the deaths of the miners.
Massey's stock rose 62 cents, to $50.75, in midday trading Thursday. Over the past year, shares have traded between $25.85 and $54.80.