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Massey Rises as Retirement Spurs Merger Speculation

Massey Energy Co., owner of the West Virginia mine where 29 people died in April, climbed after it said Chief Executive Officer Don Blankenship will retire at the end of this month.

Massey rose $1.21, or 2.4 percent, to $51.63 in New York Stock Exchange composite trading as the announcement raised speculation about a possible sale or merger. The shares have risen 23 percent this year.

Blankenship, 60, who has served as chairman and chief executive officer since Nov. 30, 2000, will be succeeded by President Baxter F. Phillips Jr., the Richmond, Virginia-based company said. Last month, Massey said its board ordered a review of strategic alternatives, a process that may lead to a sale.

“We believe MEE will be taken out,” David Khani and Mitesh Thakkar, analysts at FBR Capital Inc. in Arlington, Virginia, said in a report today. Blankenship’s retirement “should accelerate this action.”

Acquisition inquiries began earlier this year after the April 5 blast at the Upper Big Branch mine near Montcoal, West Virginia, the worst U.S. coal mining accident in 40 years.

Blankenship, who began his career with the company as an office manager in 1982, has expressed reservations about a potential sale.

‘Increases Likelihood’

“Don’s departure increases the likelihood that something will get done,” said Brian Gamble, an analyst at Simmons & Co. International Ltd. in Houston. “I’m still of the opinion that Massey will be acquired rather than being the acquirer.”

The 94-year-old company is the largest coal producer in central Appalachia, with 2.8 billion tons of reserves, 1.3 billion of which are metallurgical coal used to produce steel.

BHP Billiton Ltd. is seeking an 8 percent increase in coking coal prices to $225 a ton for the next quarter in talks with Japanese steelmakers, according to a report in Nikkei newspaper. The contract is regarded as the industry’s benchmark.

Other coal companies also rose amid merger activity in the industry, according to Jeremy Sussman, an analyst at Brean Murray Carret & Co. in New York.

Last week, Walter Energy Inc., a southern Appalachia producer of steelmaking coal, agreed to buy Canada’s Western Coal Corp. for C$3.3 billion ($3.3 billion) to add reserves and boost production of the commodity as prices increase.

Shares Up

Patriot Coal Corp., the fourth-biggest eastern U.S. coal company, climbed 75 cents, or 4.3 percent, to $18.25 today on the NYSE. International Coal Group Inc., which counts billionaire Wilbur Ross among its largest investors, gained 14 cents, or 1.8 percent, to $8.14.

“In general, anytime takeover speculation is strong, when it comes to coal, you typically see small cap names outperform,” whether it’s “real or imagined,” Sussman said.

Telephone messages left for Janine Orf, a spokeswoman for Patriot, weren’t immediately returned.

“At this time, we do not have any knowledge of what Massey’s plans are,” Ross Mazza, a spokesman for International Coal Group, said in an e-mail.

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