RICHMOND, Va. – Massey Energy directors approved the merger with Alpha Natural Resources to escape lawsuits over the Upper Big Branch mine explosion that killed 29 men last year, a Massey shareholder alleges in federal court.
Benjamin Mostaed of Ohio sued the companies and nine Massey directors on Feb. 2, seeking to prevent a merger the companies announced on Jan. 29.
His lawyer, Elizabeth Tripoli of Washington, wrote that merger would extinguish eight suits against the directors and transfer liability for three others to Alpha.
“This fact unquestionably provides the individual defendants incentive to agree to the merger,” she wrote.
Branding the merger as wrongful, unfair, and harmful to Massey stockholders, she called for class action.
“As a result of the individual defendants’ self dealing and divided loyalties, neither plaintiff nor the class will receive adequate or fair value for their Massey common stock in the proposed acquisition,” she wrote.
“Absent judicial intervention, plaintiff and the class will be irreparably injured,” she wrote.
Alpha plans to buy 102 million shares of Massey at $69.33 per share.
Massey employs about 7,300 persons and Alpha employs about 6,400.
According to Tripoli, Massey stock rose from $19 per share on July 30, 2007, to $91.19 on June 23, 2008.
She wrote that it dropped but reached a two-year high of $58.04 this Jan. 12.
“Given its strong position in the coal industry, Massey is poised for further recovery,” she wrote. “Some analysts have projected that Massey’s stock could easily climb over $70 in 2011.”
She objected to a $251 million fee Massey would pay if shareholders reject the merger.
“This termination fee will serve to chill the interest of any potential rival bidders, who likely will forego the time and expense of preparing a proposal that likely will not even be considered,” she wrote.
Mostaed sued Massey chief executive Baxter Phillips of Virginia and board chairman Bobby Inman of Texas.
He sued safety committee chairman James Crawford of Virginia, compensation committee chairman Robert Foglesong of Mississippi, finance committee chairman Richard Gabrys of Michigan, and audit committee chairman Dan Moore of West Virginia.
He sued directors Robert Holland of Texas, Stanley Suboleski of Virginia, and Linda Welty of Gerorgia.
District Judge Robert Payne will preside.