coal sale still on .... and ubs is still there, page-4

What people think will the coal sale go ahead with rudds tax reform. Peabody is recosidering it's position with MCC.
Thanks to rudd the dud overseas investers are now spooked.


.Macarthur slumps as Peabody reconsiders $4.1bn takeover bid Rick Wallace From: The Australian May 04, 2010 12:00AM INVESTORS dumped shares in Macarthur Coal yesterday on fears US coal giant Peabody Energy might walk away or recast its $4.1 billion takeover offer for the Queensland miner.
Peabody spooked the market by saying it was assessing the impact of the government's proposed resources tax regime on its takeover bid.

Shares in Macarthur slumped almost 10 per cent, or $1.47, to $14, as analysts warned the Rudd government's proposed "super profits" tax might prompt Peabody to reduce its $16 a share offer.

"We are continuing our due diligence and will factor in the potential impact of the Henry tax review," Peabody spokeswoman Jennifer Morgans said yesterday.

Keith De Lacy, chairman of Brisbane-based Macarthur, the world's largest producer of pulverised coal, said the government risked hurting a vital industry that had helped save Australia from recession. "Always 50 per cent of our net profits went into development and exploration, and so much of that is going now, so obviously we'll grow slower."

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Macarthur declined to comment directly on the prospect of a change to Peabody's offer, but Macquarie analysts said Peabody might be forced to reduce its bid as the new tax could affect its valuation of Macarthur.

"The prospective fall in (Macarthur's) net present value . . . is likely to see Peabody reassess its estimate of fair value," Macquarie analysts said yesterday.

UBS chief strategist David Cassidy said the new tax had cast a pall over future merger and acquisition activity in the mining sector and could prompt a rethink by Peabody.

"You would think twice about an Australian takeover if you are seeing this news," he said.

Peabody was due to complete due diligence on the Macarthur bid yesterday, but will now have to assess the impact of the tax changes, including the extent to which Macarthur will be affected by the proposed tax regime and whether the resources tax will pass parliament in its current form.

The Rudd government said the 40 per cent tax would apply to profits above a "normal return" -- defined as the bond rate (now 6 per cent) -- after allowing for extraction costs and capital investment.

The government predicts it will raise $9 billion a year by 2013-14, even after giving companies a rebate for the $6bn a year they pay in mining royalties to the states.

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