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Peabody Goes for Macarthur Coal

Written By Brianna Panzica

Posted July 11, 2011

Peabody Energy (NYSE: BTU) has shown continual interest in Australia’s Macarthur Coal (ASX: MCC).

Last May, the St. Louis-based company placed a bid of $16 per share for the Queensland coal exporter.

This bid was rejected, mainly by Chinese shareholder Citic, and Peabody backed down shortly due to mining taxes.

But on Monday Macarthur announced that Peabody has come back with a second bid – this time working alongside Indian steelmaking giant ArcelorMittal (NYSE: MT).

ArcelorMittal owns 16% of Macarthur’s shares, second only to Citic, which controls 24% of the company.

This joint bid has given Peabody more of a presence as it returns with a major Macarthur shareholder.

The new bid offers $16.50 per share, a total of around $5.1 billion, which is currently a 40% premium over market price.

The bid closely follows an announcement of Australia’s plan to tax carbon emissions, and has happened despite recent flooding in the Queensland coalmine location.

These circumstances should not affect the bid.

The major obstacle to the acquisition is the decision of Citic. As the Chinese company owns the largest portion of Macarthur’s stock, the joint bidders are relying on a positive response to ensure the bid’s acceptance.

The acquisition requires support of just over 50% of Macarthur’s shareholders.

Macarthur is a major exporter of PCI coal, or pulverized coal injection-type coal, which is a cheaper alternative to coking coal.

It is a necessary component in the steelmaking process, and the acquisition would be a successful enterprise for ArcelorMittal, the world’s largest steel maker.

The joint bid is 60% owned by Peabody and 40% by ArcelorMittal.

Shares of Macarthur opened on Monday at $10.99 but rose to $11.08 following the announcement of the joint bid, according to the New York Times’ “DealBook”.

Peabody was most recently successful in gaining an investment opportunity in Mongolia’s Tavan Togloi coal deposit.

If this bid is accepted, it will mean great things for Peabody’s ever-growing presence in the coal industry.

Look out for this one.

That’s all for now,


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