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Peabody, Arcelor win over 50% of Macarthur

by Paul Whitfield | Published October 24, 2011 at 12:19 PM

Peabody Energy Corp. and ArcelorMittal on Monday, Oct. 24, declared unconditional their A$4.9 billion ($5.08 billion) offer for Macarthur Coal Ltd. after they secured more than 50% of the Australian metallurgical coal producer.

Peabody Energy Corp., which controls 60% of the partner's bid vehicle PeamCoal Pty. Ltd., said the A$4.9 billion offer values Macarthur at about 9.9 times forecast Ebitda for 2012.

"PEAMCoal ... has a relevant interest in approximately 59.85% of the Macarthur shares, excluding shares," Peabody and Arcelor said in a joint statement.

The deal brings to an end a roughly 19-month chase for Macarthur. It gives St. Louis-based coal producer Peabody and ArcelorMittal, the world's No. 1 steel company, control of the world's largest maker of coking coal for use in pulverized coal injection blast furnaces. Prices for coal and in particular metallurgical coal have risen sharply in recent years driven by rising demand from Chinese and Indian steelmakers.

The success of the bid for Macarthur comes amid reports that another Australian coal producer, New Hope Corp. Ltd., could be the target of a A$5 billion bid by JSW Steel Ltd., India's No. 3 steelmaker.

Peabody has been chasing Macarthur since March 2010, when it made an initial A$13 per share bid that it raised first to A$14 and then A$16 in the following weeks. In May of the same year, the bid was cut to A$15, with Peabody citing a looming Australian resources tax and the outcome of due diligence. Peabody's solo run at Macarthur was subsequently dropped but was revived in July this year with the creation of PeamCoal, which offered A$15.50 and then A$16, a bid that finally won the support of Macarthur's board.

The announcement that the bidders had secured a majority stake came just days after Macarthur's largest shareholder Citic Resources Holding Ltd. of China said that it would tender its about 25% of Macarthur to the offer. Citic had sought to engineer a rival play for Macarthur but gave up after its would-be partner Anglo American plc pulled out of talks.

PeamCoal is still hoping to win more than 90% of Macarthur, a holding that would allow it to squeeze out remaining shareholders, and has offered a further A$0.25 per share if it reaches the target prior to Nov. 11. Shares in Macarthur closed Monday at A$16.20, marginally lower than their previous close.

Separately, The Australian newspaper reported Monday that India's JSW was studying funding options as it pondered an A$5 billion offer for New Hope. New Hope, which is based in Queensland, put itself on the block earlier this month when it said it would invite selected companies to bid for its operations.

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Peabody, Arcelor win over 50% of Macarthur

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