Loeb Quits Massey Board, Decries ‘Blankenship Discount’

Jun 14 2007 | 11:45am ET

Just over a year after winning a pair of seats on the board of Massey Energy Co. in a furiously contested proxy battle, Third Point’s Dan Loeb is giving them up. The CEO of the New York-based activist hedge fund and Third Point analyst Todd Swanson resigned their seats on the board of the Richmond, Va.-based company today, all the while continuing their attacks on Massey CEO Don Blankenship.

In it’s “misguided insistence on keeping” Blankenship as CEO, the board’s loyalty “outweighed strategic considerations and prevented the consummation of a deal that would have been in the best interest of all shareholders,” Loeb and Swanson wrote in their resignation letter, filed by Massey with the Securities and Exchange Commission. “Most importantly, we believe that the company’s decision to stay independent is a fundamental mistake, and we cannot support the company in its choice of the wrong alternative for the wrong reasons.”

Third Point has been pushing Massey to dump Blankenship and find a merger partner, and Massey had hired Goldman Sachs to investigate how to increase its share price. But on Monday, the company said Goldman’s review had ended and it would not seek a buyer, saying independence is in shareholders’ best interest—certainly not what Loeb wanted to hear.

In the letter, Loeb—as is his wont—did not pull punches. Referring to the regulatory and environment problems facing Massey that could result in up to $2.4 billion in fines, he wrote, “These and other correctible deficiencies combine to maintain a ‘Blankenship Discount’ in the market price for Massey’s shares, and do a grave disservice to our shareholders by masking the underlying strength of the company’s business, assets and workforce.”


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