Proxy Advisers Split in Massey Fight

RICHMOND, Va. (HedgeWorld.com)--The two best-known proxy advisers have taken very different views of an ongoing fight over two seats on the board of directors of Massey Energy Co., a dispute to be resolved at a shareholders' meeting on May 16.

Institutional Shareholders Services, Rockville, Md., has recommended that shareholders vote on the Third Point LLC white proxy card for Daniel Loeb, although it has also been suggested that they withhold their vote from the other dissident nominee, Todd Swanson.

Mr. Swanson, said the ISS, "would not add any additional skills ... and we question whether he would exercise independent judgment from Mr. Loeb considering he is an employee of Third Point." Still, the ISS did agree with important Third Point contentions. "We note that the combination of the financial, strategic and governance issues facing the company may be depressing the company's valuation," it said. Massey "trades at a discount to its peers using various valuation metrics."

Glass, Lewis & Co. LLC, a San Francisco firm, was a good deal more supportive of management in its analysis. "Massey has generated better returns for shareholders relative to its peers on a long-term historical basis," according to its report, released May 5. "Considering this, and the fact that the Dissidents have not put forth an alternative plan ... we believe that withholding votes from management's nominees appears premature."

The underlying dispute is that Third Point, along with Jana, has contended for months that Massey should take on more debt in order to finance a stock repurchase plan. Massey's present $500 million stock repurchase plan looks, to the hedge funds, to be far too limited.

Aside from the size of the repurchase plan, the two sides of this fight disagree over what Third Point sees as managerial conflicts of interest and excessive perquisites.

Third Point controls 4.8 million shares of Massey, which is 5.9% of those outstanding.

Massey is either the fourth or the sixth largest coal company in the United States, depending on how one counts. It sold 40.4 million tons of coal in 2004, and has operations in Virginia, West Virginia, and Kentucky.

CFaille@HedgeWorld.com

Contact Bob Keane with questions or comments at bkeane@investmentadvisor.com.

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