Macarthur Coal Rejects Peabody’s Revised Offer (Update2)
2010-05-18 03:53:47.213 GMT
By Elisabeth Behrmann and Jason Scott
May 18 (Bloomberg) — Macarthur Coal Ltd., the world’s largest pulverized coal producer, rejected Peabody Energy Corp.’s reduced A$3.8 billion ($3.3 billion) cash bid, saying it was too low. Its shares plunged the most in 17 months.
Citic Group, Macarthur’s largest shareholder with 22.4 percent, said the offer’s price and structure weren’t acceptable, Brisbane-based Macarthur cited the Chinese-backed investment fund as saying in a statement. ArcelorMittal, the No.2 holder, was also unlikely to approve the bid, Macarthur said.
Peabody, the biggest U.S. coal producer, this month cut its offer to A$15 a share from A$16 a share after studying Macarthur’s finances and the Australian government’s proposed 40 percent tax on resource project profits. Macarthur has dropped 24 percent since the tax was proposed to trade at a discount of 22 percent to Peabody’s offer.
“Macarthur is subject to changes in valuation because of the tax laws,” said Chris Weston, head of institutional dealing at IG Markets in Melbourne.
Macarthur’s shares plunged as much as 14 percent in Sydney, the most since Dec. 16, 2008. They traded 12 percent lower at A$11.76 at 1.24 p.m. local time.
The tax may have a “serious impact” on acquisitions, Xstrata Plc, the world’s largest thermal coal exporter, said last week. Increased “resource nationalism” and higher taxes will be a major risk for mining companies in the next few years, BlackRock Investment Management Ltd. said last month.
Macarthur’s three largest shareholders together control 47.3 percent, with Citic’s holding followed by ArcelorMittal’s 16.6 percent and Posco’s 8.3 percent. Peabody’s takeover plan needs acceptance from 75 percent of shares voted.
“Macarthur’s stance proves the difficulty of completing a takeover with large existing shareholders to contend with,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “Peabody might be back or a fall in share price may invite others to the party.”
Citic said it believed Macarthur’s long-term strategic value exceeds Peabody’s offer by “a significant margin,” Macarthur said in the statement.
Peabody is bidding 20 times earnings before interest and tax, according to data compiled by Bloomberg. That compares with the 7 times Ebit that Yanzhou Coal Mining Co. paid for Felix Resources Ltd. in a A$3.5 billion takeover last year.
Macarthur last month rejected a takeover offer from New Hope Corp. of 2.7 New Hope shares for one of Macarthur’s, or A$14.50 cash. Meredith Hemsley, a spokeswoman on behalf of New Hope, declined to immediately comment.
New Hope tabled its offer after Macarthur recommended shareholders approve a deal that would have seen Hong Kong-based commodity trader Noble Group Ltd. become its largest holder.
Noble shareholders rejected that deal after Macarthur said it would examine Peabody’s bid.
Citic and ArcelorMittal want “an independent producer that they can rely on for security of supply,” Pengana’s Schroeders said.
Prices for steelmaking coal are rising on demand from China and as rain earlier in the year and ongoing rail and port constraints in Australia’s Queensland curb exports.
Posco agreed to pay $167 a metric ton, or 109 percent more than previously, for semi-soft coal in a three-month supply contract with an Australian producer, UBS said March 26. That compares with $80 a ton for the year ending March 31, and a UBS AG forecast of $125 a ton.
–Editors: Andrew Hobbs, Keith Gosman
To contact the reporters on this story:
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To contact the editor responsible for this story:
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