FBR Capital said it is maintaining its rating on Massey Energy (NYSE:MEE) at "Outperform," citing reported board meetings dealing with strategic alternatives for the company, which if true, could possibly lead to a sale of the coal miner.
"Although Massey Energy (MEE) reports 3Q10 results after the close on October 26, 2010, The Wall Street Journal has published an article noting that MEE's board is in the process of announcing strategic alternatives, including sale, acquisition, or going private. The extreme pressure from MSHA, post-UBB, has clearly affected near-term margins and caused MEE's management to spend significant time on its own investigation. While the outcome of all the investigations is still unknown (although pieces have come out), we do believe there is a real takeout scenario for the company; and we have updated our takeout valuation to around $50.00 per share, based on recent $/ton transactions and a DCF—both of which are very simplistic. We do not believe that MEE can go private and increase leverage in its current form (asset sales needed); the best outcome, if a strategic review is being done, would be a sale scenario," said FBR.
Massey moved up on the supposition, closing Tuesday at $37.33, gaining $1.77, or 4.98 percent. FBR has a price target of $47 on Massey.
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