Takeover from Peabody, page-3

Extract from todays AFR:

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Barrenjoey analyst Glyn Lawcock said the Peabody business in the US was heavily weighted towards the low margin dometic market and carried big liabilities.

In contrast, Coronado generated only 11 per cent of its revenue from thermal coal in 2021 with the rest coming from coking coal for steelmaking.

“I reserve judgment to see what the proposed transaction looks like, but I don’t think a combined business with all that US thermal domestic coal would be welcome by the Australian investor community,” Mr Lawcock said.

“Ultimately at one level is there some element of providing increased liquidity as an exit strategy for major shareholders as well?”

Mr Lawcock said Peabody, which has two thermal coal mines in NSW and five Queensland mines that sell intermediate coking coals, had a chequered history of investing in Australia.

He said Peabody was seen as having paid too much for some assets and was now in talks with Coronado at a time of elevated coal prices.

Depending on structure, any deal between St Louis-headquartered Peabody and Coronado would face cross-jurisdiction complications.

The lack of detail around any deal has led to investor speculation it could involve a Peabody scrip bid for all of Coronado, Coronado buying Peabody’s Australian assets or Peabody acquiring Coronado’s US assets.

Another theory is that Coronado could merge its Australian business with another coal player.

The talks between Coronado and Peabody have coincided with large volumes of stock in Whitehaven Coal changing hands.