Fluor, Shell to Divide Assets of Massey Coal : Irvine Firm to Get Most of Mining Operations
Fluor Corp. and Shell Oil agreed Monday to end their joint ownership of giant Massey Coal, with each company taking half the assets.
Under terms of the the agreement, Irvine-based Fluor would retain the management, organization and name of Massey Coal, the Richmond, Va.-based coal mining company. Fluor would also keep mining operations in Kentucky, Tennessee, Pennsylvania and West Virginia that generated $631 million in revenue from coal sales in fiscal 1986.
Houston-based Shell would take both of Massey’s shipping terminals in Newport News, Va., and Charleston, S.C., as well as coal-producing properties and reserves that accounted for $400 million in revenue in fiscal 1986.
Fluor said that in the division of Massey assets, which it expects to be completed in July, Fluor will receive $100 million in cash, and Shell will assume all $40 million of the coal company’s existing debt.
David S. Tappan Jr., chairman and chief executive of Fluor, said the division of Massey Coal is “an important element in Fluor’s restructuring program.” He said that by owning 100%, rather than 50%, of a coal business Fluor will attain “greater operating flexibility.”
Fluor has sold more than $1.7 billion in assets during the past two years, including its corporate headquarters in Irvine. The company had combined losses of nearly $700 million for fiscal 1985 and 1986.
No Plans to Sell
Fluor obtained its interest in Massey six years ago, through its acquisition of St. Joe Minerals Corp.
Fluor spokesman Rick Maslin said: “We have no intention of selling (the coal operation) at this time.”
However, securities analysts said that Fluor initially wanted to sell its 50% interest in Massey Coal to Shell but ultimately agreed instead to split the company’s assets after reaching an impasse on what price Shell was willing to pay.
“The parties discussed a number of different options and decided the division of assets was the most desirable option,” said John Irvine, a spokesman for Shell Mining Co. unit of Shell Oil, although he added that he did not know the particulars of the discussions.
Robert W. McCoy, Jr., a securities analyst with the investment firm of of Kidder, Peabody & Co., said the division of Massey is “a plus for Fluor” because it will make Fluor’s coal mining assets “more liquid.” He said that while Fluor could choose to continue working the coal operation, he believes that Fluor instead will decide to sell.
Terrence M. York, an analyst with Drexel Burnham Lambert, predicted that Fluor will wait until next year to sell its coal operation, which produced $49.3 million in pretax operating income for Fluor in fiscal 1986, while at the same time Fluor’s metal operations lost $25.4 million and its engineering and construction business lost $75.6 million.
York said that coal “represents the major earning asset in the company today.”
