Alpha Natural largest shareholder opposes merger with Foundation Coal

By Lisa Kerner

Charlotte, N.C., July 20 - Alpha Natural Resources, Inc.'s largest shareholder Duquesne Capital Management LLC said it will vote against the company's proposed merger with Foundation Coal Holdings, Inc., according to a schedule 13D/A filed with the Securities and Exchange Commission on Monday.

Duquesne, with an 8.31% stake in Alpha Natural, said it believes the merger is not in the long-term best interests of the company's shareholders.

Based on its analysis, Duquesne believes the proposed transaction is financially dilutive to shareholders by $10 to $15 per share.

The deal also increases balance sheet risk to the company via the assumption of Foundation Coal's $650 million OPEB/pension liability and $530 million in net financial debt, according to a news release included in the filing.

Shareholders of both Alpha Natural and Foundation Coal will vote on the merger at separate special meetings on July 31.

As previously reported, in May the companies agreed to combine in an all-stock transaction valued at $2 billion to form the third-largest coal producer in the United States.

Foundation stockholders will receive 1.084 shares of the new company for each share of Foundation. Each Alpha share will automatically become one share of the combined company.

Alpha Natural Resources, located in Abingdon, Va., supplies Appalachian coal to the steel industry, electric utilities and other industries. Foundation is a Linthicum Heights, Md.-based coal producer.

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