Peabody Energy Corp, the biggest US coal company, offered A$3.3 billion (US$3 billion) in cash for Australia’s Macarthur Coal Ltd to benefit from rising demand in China, where imports tripled last year.
The unsolicited A$13-a-share bid sent shares in Brisbane-based Macarthur surging to A$14.05, as investors bet Peabody will have to increase its offer to win over ArcelorMittal and Posco, who paid as much as A$20 a share for their stakes. The proposal is “highly conditional” and not in the best interest of shareholders, Macarthur said yesterday in a statement.
GETTING BIGGER
“Peabody is probably looking to get bigger in a market that’s growing, especially when compared with the US,” said Andrew Harrington, an analyst at Patersons Securities Ltd in Sydney. “A bidding war for Macarthur is possible.”
The offer may thwart Noble Group Ltd’s attempt to become Macarthur’s biggest shareholder in a stock swap for the Hong Kong-based commodity supplier’s Gloucester Coal Ltd. Peabody operates eight mines in Australia’s Queensland and New South Wales states, and is seeking more to feed power stations and steel mills in China, the world’s largest user of coal.
ArcelorMittal, the world’s biggest steelmaker, holds 16.6 percent of Macarthur and South Korea’s Posco owns 8.3 percent, Bloomberg data showed.
Citic Australia Coal Ltd has 22.4 percent. Peabody is in talks with the three companies and is offering them the opportunity to retain their interest in Macarthur, it said in a statement.
The deal values Macarthur, the world’s biggest exporter of pulverized coal used by steelmakers, at 17 times earnings before interest and tax, which is more than double the EBIT multiple that Yanzhou Coal Mining Co (兗州煤業) paid for Felix Resources Ltd in a A$3.5 billion takeover seven months ago.
HITCH
Peabody’s offer is conditional on Macarthur’s takeover of Gloucester not proceeding, Macarthur said. Gloucester has recommended shareholders accept Macarthur’s A$8 a share offer.
“There is a strong strategic rationale for a combination of Macarthur’s operating assets and project pipeline with Peabody’s growing Australian platform of metallurgical and thermal coal production,” Peabody said, saying it is “disappointed” with Macarthur’s reaction to its bid.
DOUBLING OUTPUT
Macarthur chief executive officer Nicole Hollows, aiming to complete the Gloucester takeover by July, is seeking to double output in the next five years.
The company has two operations in Queensland’s Bowen Basin. Four of Peabody Australia’s mines are located in the same region, its Web site said.
“Peabody’s proposal is highly conditional and does not fully value Macarthur and its significant growth prospects,” Macarthur chairman Keith De Lacy said in a statement.
The company also said the offer did not acknowledge that “the outlook for coal markets has improved significantly over the past quarter.”
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