Monday, July 21, 2008

Massey Points to $50 Billion Mergers on U.S. Coal

From Climateer Investing, February 19:
I would not be surprised to wake up one day to find that China Investment Corp. had made a bid for BTU.
From Bloomberg:
Cleveland-Cliffs Inc.'s $10 billion takeover of Alpha Natural Resources Inc., the biggest in the coal industry, may unleash a wave of acquisitions in a business where it's proving cheaper to buy than to build.

Peabody Energy Corp.'s deposits of 9.3 billion tons, the world's largest, are worth at least $146 billion at today's market prices, while the St. Louis-based company's stock is valued at $19.6 billion on the New York Stock Exchange. Massey Energy Co.'s reserves total about $240 billion, compared with the $6.25 billion valuation of its shares.

While the worldwide bear market slowed mergers and acquisitions by 35 percent in the first half of the year, takeovers of energy and mining companies jumped 33 percent so far this year as prices of coal and oil rose to record highs. The top eight U.S. coal producers, worth more than $50 billion, are still up for grabs.

``In the next 12 months there will be an unprecedented amount of both domestic and cross-border mergers and acquisitions,'' said Wilbur Ross, chairman of International Coal Group Inc. in Scott Depot, West Virginia, and a board member at ArcelorMittal, the world's biggest steel company. ``U.S. reserves are undervalued relative to those in the rest of the world.''>>>MORE