RICHMOND, Vga. ( TheStreet) -- Massey Energy ( MEE) is spending $960 million in a combined cash and stock acquisition of privately held coal producer Cumberland Resources. Massey said it will acquire Cumberland free of debt.

Massey is paying $640 million in cash and $320 million in shares of Massey's common stock.

The major coal market acquisition was announced after the market close on Tuesday. Massey shares were down in after hours trading by a little more than 2%.

Massey is the largest coal producer in Central Appalachia and a member of the S&P 500 Index.

In 2009, Cumberland generated coal revenue of $550 million from the production and sale of 7.8 million tons of Central Appalachian coal.

Massey announced alongside the acquisition news a somewhat disappointing outlook for the first quarter 2010. Massey said preliminary data indicates that operating results for the first two months of 2010 were below its internal operating forecast, and that the full first quarter 2010 results are currently anticipated to also be below forecasted operating results. The first quarter shortfall is largely the result of continuing weather related disruptions of coal production and shipments, Massey said.

Cumberland's assets include an estimated 416 million tons of contiguous coal reserves, a preparation plant in Kentucky served by the CSX ( CSX)railroad, and a preparation plant in Virginia served by the Norfolk Southern ( NSC) railroad.

Massey expects to be able to produce approximately 5 million tons of metallurgical quality coal annually with the existing Cumberland assets, and does not expect any additional capital investment will be required to reach this production target.

Massey will have an estimated total reserve base of 2.9 billion tons, and an estimated 1.3 billion tons of coal reserves of metallurgical quality.

Don Blankenship, Massey CEO, said, "The Cumberland assets and operations will be highly complementary to our existing base and fit well with our strategy in Central Appalachia. Cumberland's track record of low-cost production, their focus on underground mining and their low legacy liabilities are consistent with Massey's history and strategy.

Massey's Blankenship said the Cumberland acquisition will be accretive to earnings in 2010.

Cumberland generated EBITDA of $115 million in 2009.

As of December 31, 2009, Cumberland had approximately 8.1 million tons of coal committed and priced for sale in 2010, primarily with thermal coal customers.

Cumberland has a workforce of more than 1,000.

Stifel Nicolaus served is acting as advisor to Massey and UBS Investment Bank is acting as lead financial advisor to Cumberland

-- Reported by Eric Rosenbaum in New York.

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