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Coal Company Acknowledges Investment Critics in SEC Statement

Posted on: Thursday, 29 September 2005, 18:00 CDT

By Paul J. Nyden, The Charleston Gazette, W.Va.

Sep. 29--Massey Energy Co. filed a statement with the U.S. Securities and Exchange Commission late Monday acknowledging that it received critical letters from two major investment firms. Together, those two firms currently own 12.4 percent of the company's stock.

Barry Rosenstein, managing partner of JANA Partners LLC based in San Francisco, wrote a letter to Massey on Sept. 15, and Daniel S. Loeb, a managing member of Third Point LLC based in New York City, wrote on Sept. 19.

Both letters complained Massey is not making enough money for its shareholders.

The two investment companies bought a total of $454.6 million worth of Massey stock in 99 different transactions between July 27 and Sept. 16, according to previous SEC filings by the two investment companies.

Massey's Monday filing noted the two critical letters each proposed "that Massey incur additional debt and use the proceeds of those borrowings and cash on hand to repurchase shares of the company's common stock."

Don Blankenship, chairman and CEO of Massey, stated, "Our board of directors, with advice from our financial and other advisers, will consider the proposals made in the letters carefully as part of our continuing evaluation of potential uses of expected free cash flow.

"As previously announced, we continue to evaluate the uses of our expected free cash flow, in the context of our capital structure and potential strategic opportunities, with the objective of increasing long-term shareholder value," Blankenship stated in the SEC filing.

Blankenship's own contract as Massey's CEO expires on Dec. 31. In February, the company's board of directors renewed Blankenship's contract for only eight months after his previous three-year contract expired on April 30.

Blankenship also stated, in the SEC filing, that the company believes "the combination of positive market factors and Massey's position as the leading coal producer in Central Appalachia place the company in a particularly advantageous position for future growth and profitability.

"The board's ongoing evaluation process is focused on enhancing our ability to translate those advantages into long-term shareholder value. We remain focused on executing our strategic plan, operating our business and evaluating capital markets opportunities," he said.

Rosenstein and Loeb argued that Massey stock, which was selling for $53.15 mid-Wednesday afternoon, is undervalued compared to stocks in similar coal companies.

Massey Energy, based in Richmond, Va., has mining operations in West Virginia, Kentucky and Virginia. It is the nation's fourth-largest coal company, based on annual coal revenues.

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Copyright (c) 2005, The Charleston Gazette, W.Va.

Distributed by Knight Ridder/Tribune Business News.

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MEE,

Source: The Charleston Gazette

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