Xstrata's bid turns up the heat in Macarthur Coal battle Matt...

Xstrata's bid turns up the heat in Macarthur Coal battle

Matt Chambers
From: The Australian
April 12, 2010 12:00AM

SWISS mining giant Xstrata's planned $4 billion counterbid for Macarthur Coal would see it create a heavyweight Australian coalminer, in which it intended to take a less than 50 per cent stake, according to a proposal it has put to Macarthur's biggest shareholders.

Xstrata and competing bidders US-based Peabody Energy and New Hope are this week set to turn up the pressure on Macarthur to spurn Hong Kong trader Noble Group and a planned $1bn scrip acquisition of a Noble subsidiary, Hunter Valley miner Gloucester Coal.

Noble, run by British billionaire Richard Elman, has vented its frustration at the global bidding war that threatens to disrupt its plans. It says it is exasperated and does not understand Macarthur's decision on Friday to push back by a week a shareholder vote on the Gloucester acquisition scheduled for today.

All prospective Macarthur bidders want to block the Gloucester deal and associated mine stake sales because it would give Noble a potential 24 per cent blocking stake in any subsequent takeover offers.

"We just don't get it. The boards of both Macarthur and Gloucester support the Gloucester-Macarthur merger," Noble said on Friday night after the meeting was deferred.

"It appears this vote is being delayed in response to rumours, hearsay and bids that are so qualified that even seasoned professionals have no idea what is really on the table.

"We're starting to wonder if we were the chumps to put a clear, straightforward bid on the table in a timely manner."

Under the Xstrata proposal, which has not been put to Macarthur despite weeks of talks with major shareholders, Xstrata would offer cash and scrip worth about $16 a share.

There would be the opportunity to take all the cash, or keep a stake in an expanded miner with about double the current coal assets of Macarthur.

It is understood Xstrata would hold between 30 and 45 per cent of the new company, depending on how many Macarthur shareholders kept their maximum available shares and how many took cash.

Last week, Macarthur rejected a $14-a-share, or $3.56bn cash bid from US coal giant Peabody Energy and a subsequent $3.6bn scrip bid from fellow Queensland coal miner New Hope.

But it was Xstrata's approaches to shareholders, through Macquarie, that Macarthur said finally led it to pause on the Gloucester acquisition. Macarthur's shares closed at $15.55 on Friday, after rising 8 per cent on the prospect of a bidding war.

Xstrata is understood to have approached Macarthur's three biggest shareholders, Citic, Arcelor Mittal and Posco -- who hold a combined 43 per cent of the company -- with its proposal.

While Citic is believed to have rejected it, the other two have been receptive.

Xstrata has previously done due diligence on Macarthur, but Macarthur would need to do due diligence on the Xstrata assets, understood to be coking coal mines and deposits near Macarthur's operations in Queensland.

Xstrata's biggest Australian coking coal asset is a 55 per cent stake in the Oaky Creek mine in Queensland.

Macarthur chairman Keith De Lacy said the company's agreement with Gloucester, which was still supported, meant the board was unable to engage with any parties unless a superior offer was presented to them.

And to defer the meeting again, a definite offer from Xstrata or another bidder would be needed. "We wouldn't defer on the same basis again next week," he said.

http://www.theaustralian.com.au/business/xstratas-bid-turns-up-the-heat-in-macarthur-coal-battle/story-e6frg8zx-1225852477631