The United Mine Workers of America (UMWA) is objecting to Patriot Coal’s proposed plan to sell the majority of its operating assets. Patriot Coal proposes using a “stalking horse bidder,” which is when the best bidder gets some incentives before the auction. These incentives are intended to increase the value of the starting bid and eventually result in higher bidding overall.
The union objected to Patriot Coal seeking Chapter 11 bankruptcy and referred to the Company’s previous bankruptcy in which the UMWA negotiated with it regarding concessions from UMWA. It is likely that this Chapter 11 relief will further reduce pension benefits and retiree obligations.
The union has complained that the bid timeline doesn’t give competitors to the stalking horse bidder enough time to fully research and propose a bid, which reduces overall competition. The UMWA argues that Patriot Coal’s data room does not have financial projections, mine by mine data, and other information needed to evaluate the Company’s assets. UMWA also claims that Patriot Coal has delayed responding to requests from potential bidders for on-site visits.
For reasons unknown, the union argues that it should be allowed to attend the auction and be a consulting party to determine which bid is best. Really? The union legitimately believes that it deserves a seat at the table to decide which company purchases Patriot Coal? Companies should be mindful that the UMWA – or any other union for that matter – is not entitled to decide the future of a company unless the collective bargaining agreement gives them that right.