macarthur coal receives $5.1b proposal

Macarthur Coal Receives $5.1B Proposal

Bloomberg - Jul 11, 2011
By Elisabeth Behrmann

ArcelorMittal (MT) and Peabody Energy Corp. (BTU) made a cash takeover bid for Macarthur Coal Ltd. (MCC), valuing the world�s biggest exporter of pulverized coal used by steelmakers at A$4.7 billion ($5.1 billion).

ArcelorMittal, the world�s largest steel mill, and Peabody plan to bid through a jointly owned company, offering A$15.50 a share, Brisbane-based Macarthur said today in a statement. That�s a 40 percent more than today�s close. ArcelorMittal is Macarthur�s No. 2 holder, with a 13.98 percent stake.

Buying Macarthur would give the pair ownership of mines producing steelmaking coal in Australia�s Queensland state, the world�s biggest exporter of the fuel, as prices trade near a record and suitors vie for targets. The bidders will likely need the support of China�s Citic Group and South Korea�s Posco, which own 22.78 percent between them.

The bid �puts the rest of the sector firmly back as takeover targets,� Colin McLelland, resources analyst at Investec Bank Australia Ltd. said by phone from Sydney. �It�s not clear what Citic will do, I suspect they will just hold their stake.�

Macarthur fell 2.8 percent to A$11.08 at the 4:10 p.m. close of trade in Sydney, taking losses this year to 13 percent.

Second Time

Macarthur�s board will �seek to engage with Peabody and ArcelorMittal in relation to the price and terms,� the company said in the statement.

It�s the second time Peabody, the largest U.S. coal producer, has bid for Macarthur, which rejected its A$3.8 billion, or A$15 a share, bid in May last year. Macarthur ended transaction talks with Arcelor in June 2008 after buying a 14.9 percent stake the previous month.

�The bidders keep hitting them with the same number each time, more or less, so at least there is some consistency,� said Prasad Patkar, a money manager who helps oversee about $1.7 billion at Platypus Asset Management Ltd. in Sydney. �My gut feeling is that the board will be more engaged this time around.�

Citic hasn�t yet decided whether to accept the joint offer, Calvin Lam, investor relations head at Citic in Hong Kong, said. Jennifer Morgans, an Australia-based spokeswoman for Peabody, didn�t respond to a message left on her mobile phone.

Peabody and Arcelor are bidding about 8.7 times Macarthur�s projected earnings before interest, tax and depreciation, according to Bloomberg calculations based on the median of 17 analyst estimates. That compares with an Ebitda multiple of 15 for coal takeovers involving Australian companies in 2010, according to data compiled by Bloomberg.

Macarthur is being advised by J.P. Morgan Australia Ltd. and Corrs Chambers Westgarth


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