Massey Energy, the embattled coal mine operator, agreed on Saturday to sell itself for about $7.1 billion in cash and stock in a deal that will create a new giant in coal production — and could help Massey shed legal burdens arising from a marred safety record that includes the explosion last year at the Upper Big Branch mine in West Virginia.
Under the terms of the deal, Alpha Natural Resources will pay 1.025 of its own shares and $10 in cash, for a total of $69.33 as of Friday’s market close, for each Massey share. That represents a 21 percent premium to Massey’s Friday closing price of $57.23.
The deal will unite two of the biggest American producers of coal, with more than 110 mines and about five billion tons of combined reserves throughout the Appalachian region, the Midwest and Wyoming. It will also bolster Alpha’s presence in the growing market for metallurgical coal, which is used to make steel. Massey has enormous reserves of metallurgical coal, and it has increased its exports to countries like India and Brazil, where strong demand has driven up global prices for the material.
Alpha helped put Massey up for sale last year, when it made a preliminary takeover bid. Kevin S. Crutchfield, Alpha’s chief executive, told DealBook in a telephone interview on Saturday that his company had spent the past several years examining how to use its burgeoning cash reserves and clean balance sheet to grow, and settled on looking for a big deal.
After Massey put itself up for sale late last year, it began an auction process. Alpha won, beating out a rival, Arch Coal.
“This creates a significant global footprint for us,” Mr. Crutchfield said. “We’re tickled to death to be in this spot today.”But just as important, the combination is also likely to help Massey move past its legal woes arising from safety violations like the Upper Big Branch explosion last year that killed 29 people. Under Don L. Blankenship, Massey’s former chairman and chief executive, the company became a target for its poor safety practices, especially after a series of accidents that culminated in the Upper Big Branch explosion. Mr. Blankenship, an opponent of selling Massey, resigned last month.
Massey faces stiffening regulatory oversight, as well as several state and federal investigations into its operations. On Friday, the company contested the findings of a federal regulator’s inquiry into the Upper Big Branch incident, the worst mining accident in 40 years. A company executive rejected claims that the explosion arose from faulty equipment and excessive levels of coal dust.
Those legal troubles have weighed on Massey: After the Upper Big Branch explosion, the company tallied about $150 million in related expenses, and for for the 12 months ended Sept. 30, it reported $2.9 billion in net revenue but a $72.2 million loss.
Mr. Crutchfield said that he planned to draw on his company’s cleaner safety and environmental record to help resolve Massey’s legal issues, which he conceded would take time.
“I think we’ve established a pretty credible track record with regards to safety and environmental stewardship,” he said. “The goal is to run the combined company in the same manner.”
The deal is expected to close by the middle of this year, pending approvals from regulators and shareholders of both companies. Mr. Crutchfield said the merger is expected to produce an increase in Alpha’s cash flow beginning next year.
Alpha said that it would pay for the deal through existing cash and $3.3 billion in bank financing.
Alpha was advised by Morgan Stanley, Citigroup and the law firm Cleary Gottlieb Steen & Hamilton. Massey was advised by Perella Weinberg Partners, UBS and the law firms Cravath, Swaine & Moore and Troutman Sanders.
This is a longer version of the article that appeared in print.