Alpha Natural committed to Foundation Coal merger despite objection

By Lisa Kerner

Charlotte, N.C., July 24 - Alpha Natural Resources, Inc. said it remains convinced that the company's proposed merger with Foundation Coal Holdings, Inc. will create "significant, long-term value for shareholders."

According to Alpha Natural, the merger has the support of the company's base of long-term investors, despite the objections of Duquesne Capital Management, LLC.

"As the U.S.'s largest producer and exporter of metallurgical coal and a leading supplier of thermal coal, we have both real-time insight and an informed view on the short, medium and long-term outlook for this industry and the markets we are in every day," Alpha Natural said in a news release.

On Thursday, Duquesne confirmed that it will vote against the company's proposed merger with Foundation Coal on July 31 after reviewing Alpha Natural's latest proxy materials.

The shareholder, with an 8.31% stake in Alpha Natural, said it also considered "overwhelming evidence disclosed in recent days in other coal companies' earnings releases and earnings calls," according to a schedule 13D/A filed with the Securities and Exchange Commission.

In May, Alpha Natural and Foundation Coal announced they agreed to combine in an all-stock transaction valued at $2 billion to form the third-largest coal producer in the United States.

As previously reported, Foundation Coal stockholders will receive 1.084 shares of the new company for each share of Foundation Coal. Each Alpha Natural share will automatically become one share of the combined company.

Shareholders of both companies will vote on the transaction at separate special meetings on July 31.

Proxy firms back deal

On Friday, Alpha Natural announced that RiskMetrics Group/ISS reiterated its support for the merger.

RiskMetrics believes Duquesne Capital "did not meet the burden of proving that shareholders should reject the proposed transaction," an Alpha Natural news release said.

Glass, Lewis & Co., Egan-Jones Proxy Services, and Proxy Governance, Inc. also recommended that Alpha Natural shareholders vote in favor of the merger.

"This transaction, which we expect to be accretive in 2010, creates one of America's largest coal producers, with one of the industry's strongest balance sheets and credit profiles, diversity across geographies and production sources, and coal reserve holdings nearly four times the size of what Alpha holds today," Alpha Natural chairman and chief executive officer Michael Quillen said in the release.

Alpha Natural, located in Abingdon, Va., supplies Appalachian coal to the steel industry, electric utilities and other industries.

Foundation Coal is a Linthicum Heights, Md.-based coal producer.

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