Shares of coal miner Massey Energy surged 13 percent in premarket trading on Monday, the first trading day after rival Alpha Natural Resources agreed to buy it in a $7 billion deal.
In electronic trading before the New York Stock Exchange opened, 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, was up to $63.17. Alpha's stock fell 6.7 percent to $54.
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 [ID:nN29144292].
We believe a combined company of Alpha and Massey would be a 'must own' in the coal space, accounting for roughly one-third of total U.S. metallurgical coal production, said analyst Jeremy Sussman, of Brean Murray Carret & Co.
Shares in another miner, Patriot Coal, which has also been mentioned as an acquisition target, rose 2.3 percent to $26.04 in pre-market trading.
(Reporting by Steve James; Editing by Derek Caney)