Peabody and Arcelor turn hostile in fight for Macarthur

 

Peabody Energy and the steel giant ArcelorMittal have taken their A$4.7bn (£3.2bn) bid for Macarthur Coal directly to the Australian group's shareholders as its board seeks to drum up interest from rival suitors.

Peabody and Arcelor are offering A$15.66 per share for the business after the board refused to offer its backing, asking for A$16 apiece, along with a condition that the price will increase to A$18 if the bid is supported by more than 90 per cent of shareholders.

Macarthur chairman Keith DeLacy said the duo's bid "appears to be anopportunistic attempt" against the backdrop of global economic volatility and regulatory uncertainty in Australia, where the mining sector has its eyes on government proposals to impose a carbon tax on the resource-rich country's biggest polluters.

Instead, Macarthur said it is "continuing discussions" with rivals who may put forward "a superior offer". The toing and froing reflects the deal-making frenzy sweeping through the mining industry as companies and governments alike rush to secure precious natural resources. Coal, which is used in both steel making and in power plants, is particularly sought after owing to demand from emerging markets.

Macarthur presents a valuableresource, as it is the world's biggest producer of pulverised coking coal for steel making. Arcelor, which is already the second-largest shareholder in the Australian group with a stake of around 16 per cent, and Peabody said that, contrary to the Macarthur board's claims, their offer was attractive. The bid, which follows due diligence and an indicative proposal last month, includes a dividend of up to 16 cents per share.

"Our bid is compelling," Peabody chairman and chief executive Gregory Boyce said. "And we have decided to take this attractive offer directly to Macarthur shareholders to provide them with significant value."

But the list of rivals is long, with market chatter highlighting the possibility of interest from miners such as Anglo American, Rio Tinto and Xstrata. Macarthur's biggest shareholder, Citic, was also seen as a possible suitor, after its representative on the coal group's board excused himself from talks over the Peabody/Arcelor offer.

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