Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (2557)	11/24/2010 12:49:15 AM
From: richardred	Respond to of 7256

Coal demand shifts M&A focus to US By Ed Crooks and Helen Thomas in New York Published: November 23 2010 19:22 \| Last updated: November 23 2010 20:12 The US is set to be the world’s most active market for coal industry mergers and acquisitions next year, as buyers seek to secure supplies to meet an expected long-term rise in demand, a leading consultancy has forecast. The prediction came after Massey Energy, the fourth-largest US coal producer, announced a “formal review of strategic alternatives to enhance shareholder value”, which could lead to a bid for the $5bn company. Wood Mackenzie, the consultancy, argues that while the focus in coal mining M&A has recently been on Australia and Asia, the US is about to become the busiest region for deals, with all the mid-sized companies potentially involved as bidders or targets. Metallurgical or “met” coal, used for steel production, is in particularly strong demand, with large steelmakers looking to tie up supplies of raw materials. Thermal coal, used for power generation, is also attracting interest because of fast-growing consumption in China, in spite of concerns about the greenhouse gas emissions and local pollution created by burning coal. China became a net importer of thermal coal last year, and the price of thermal coal for delivery to Asia has risen more than 30 per cent in the past 12 months to $108 per tonne, according to Platts. US thermal coal prices have been subdued, however, because exports are still very small. The interest in coal assets was evident last week, when Vallar, the cash shell founded by financier Nat Rothschild, paid $3bn to create a mining company backed by the coal assets of Indonesia’s powerful Bakrie family, and Walter Energy, the US coal company, offered $3.3bn for Canadian peer Western Coal. Drummond & Co, the privately held Alabama-based mining company, is also considering cashing in on the demand for coal assets. It is taking bids for its thermal coal mines in northern Colombia, which could fetch up to $8bn. Gero Farruggio, head of coal research at Wood Mackenzie, said the Australian and Indonesian industries were now well consolidated, and any further deals were likely to be relatively small. In the US, however, he said there were still several good-sized companies that could be involved in M&A. The coal sector includes companies such as Consol Energy, with a market capitalisation of $9.6bn, Alpha Natural Resources, valued at $6.1bn, and Arch Coal, valued at $4.9bn. Massey, one of the largest owners of met coal in the US, has been under intense scrutiny since the accident at its Upper Big Branch mine in April, which killed 29 people. Alpha has reportedly made an approach to Massey about a possible bid, with Consol, Arch and ArcelorMittal, the world’s largest steelmaker, also said to be interested. Massey’s review is being advised by Perella Weinberg Partners LP and Cravath, Swaine & Moore LLP. ft.com