M&A and the coal CEO’s girlfriend

August 12, 2010

coal trainConsolidation in the U.S. coal industry might seem elementary to some, but tussles that date back to elementary school could prevent it from happening, according to one CEO.

With demand for coal soaring in recent years, U.S. coal miners are looking as far as Mozambique and Mongolia to pick up new reserves.

But consolidation among U.S. companies has been slower to happen, with Alpha Natural Resources’ takeover of Foundation Coal last year being one exception.

Surprisingly, a barrier to this consolidation could be the personal dynamics among the executives in the tight-knit industry, many of whom live or grew up in the Appalachian region of the United States.

“We all know each other,” James River Coal Co Chief Executive Peter Socha said at the Jefferies Global Industrial and Aerospace & Defense conference Wednesday.

“In many instances people grew up together, going back (as far as) grade school, high school. People went to college together … we all hunt together, golfed together and fished together,” said Socha, who paid for college working on a coal-bed methane well.

“We are talking about being big personalities who know each other going back decades … There is a really big CEO that I know in the industry who lost a girlfriend to somebody else years and years ago when they were in high school and to this day, he still hates that CEO.”

Socha said that while some deals will get done and Wall Street bankers will continue to push for others where they see companies that fit together well, these obstacles could still present themselves.

“Sometimes — as in the case of the girlfriend that was lost — there are extraneous factors that Wall Street may not fully understand.”

(Reporting by Antonita Madonna Devotta)

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