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April 1, 2010
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Australia’s Macarthur Coal Limited declined Peabody Energy Corporation’s (BTU) takeover bid of $3.0 billion, saying it undervalues the company and its growth prospects.
Macarthur holds 145 million tons of reserves of low-volatile pulverized coal injection (PCI) coal and 1.3 billion tons of resources. It has a current production capacity of more than 5 million tons per year.
Peabody already owns nine coal operations in the Australian states of Queensland and New South Wales which produced 22.3 million tons of coking and thermal coal in 2009.
Peabody believes that there is a strong strategic rationale for a combination of Macarthur's operating assets and project pipeline with Peabody's growing Australian platform of metallurgical and thermal coal production.
According to Macarthur management, Peabody's proposal is highly conditional and is not in the best interest of its shareholders.
The Offer
Peabody had made a conditional, non-binding proposal of A$13 per share, representing a total equity value of A$3.3 billion (US$3.0 billion).
The offer is conditional on winning support from Macarthur's three major shareholders, China's CITIC Resources, ArcelorMittal and POSCO, which together own 47.3% of Macarthur. The offer is also conditional on Macarthur's proposed A$832 million takeover of Gloucester Coal not going ahead.
Peabody said it remained open for discussion with Macarthur's board and was in talks with the three big shareholders. It said the three big shareholders would be offered the alternative of keeping their existing stakes in Macarthur.
Background
In December 2009, Macarthur announced an offer to acquire all of the issued shares of Gloucester Coal Limited, an ASX listed company.
Noble Group is the largest shareholder of Gloucester, holding 87.7% of Gloucester shares. On accepting the Gloucester offer, Noble intends to receive Macarthur shares and not cash.
On January 29, 2010, Macarthur entered into other conditional agreements with Noble. Under all of these transactions, Noble would acquire up to 24.6% of Macarthur and become its largest shareholder.
Macarthur shareholders are set to vote on April 12, 2010 on the Gloucester deal, which involves issuing shares to the Noble Group.
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