J.P. Morgan Discusses Massey energy Deal (MEE, ANR)

J.P. Morgan Chase & Co. is out with a research report on the Massey Energy MEE-Alpha Natural Resources ANR. In a note to clients, J.P. Morgan writes, "Massey has agreed to a $69 per share mainly stock deal with Alpha Natural Resources (ANR). Press commentary suggests that Arch Coal was also in the bidding, and this might have contributed to the size of the premium. The market has been friendly toward coking coal deals as evidenced by appreciation of both the target and the buyer in the Walter Energy (WLT) deal, the strength of Massey after its Cumberland bid, and the strength in Alpha on Friday as deal speculation lifted Massey. Yet the deal probably faces some challenges. We suspect the landlocked US steelmakers may have something to say about this level of consolidation in the Central Appalachian coking coal market. Also, operating 110 mines will be a formidable managerial exercise, and the liability for the Upper Big Branch tragedy is yet to be finalized. Consolidation of CAPP miners is in our opinion necessary and should be welcomed. We wish the parties well as they optimize the assets." Shares of MEE are up $5.77 in pre-market trading to $63.00, a gain of 10%.