The board said Peabody had sought approval for the deal from major shareholders CITIC Resources, plus steelmakers ArcelorMittal and POSCO, which collectively own 47.4% of Macarthur.
As conditions of its offer, Peabody was also seeking to halt Macarthur’s takeover bid for Gloucester Coal, to complete a limited due diligence review on acquiring Macarthur and to gain Foreign Investment Review Board approval.
The Macarthur directors said the offer was not an adequate premium to the company’s recent trading prices, or the positive outlook for coal prices.
“Peabody has advised Macarthur that it has initiated discussions with Macarthur’s three major shareholders in relation to an aspect of the proposal that may provide these shareholders with an ability to retain their respective interests in a privatised Macarthur, in an unlisted entity controlled by Peabody,” Macarthur announced.
“However, Macarthur has been advised that at the current time no agreements have been entered into with those shareholders. Peabody has indicated that its preference would be to proceed by way of scheme of arrangement.”
Macarthur will proceed with its shareholder meeting on April 12 to consider its Gloucester takeover proposal of 0.84 Macarthur shares or $8 in cash for each Gloucester share.
Commodities trader Noble Group bought an 87.8% stake in Gloucester in a $7 per share cash takeover last year.
Under the Gloucester offer, Macarthur intends to issue shares to Noble and to gain Noble’s stake in the Middlemount Coal joint venture, which forms a key part of the Queensland coal producer’s growth strategy.
In an independent expert’s report on the Gloucester takeover, a minimum base case had Noble earning a 20.7% stake in Macarthur, while the maximum case had Noble gaining a 24.6% stake.
Peabody’s offer has caught industry observers offguard, with Macquarie Research analysts forecasting back in January that Noble would eventually launch a full takeover play for Macarthur.
Meanwhile, Gloucester said its directors would continue to unanimously recommend its shareholders accept Macarthur’s offer in the absence of a superior proposal.
Peabody response
Peabody said its $3.3 billion offer for Macarthur was a 34% premium to the value of Macarthur’s planned issue to Noble under the proposed Gloucester transaction.
The major producer confirmed it had initiated discussions with Macarthur’s three major shareholders and that these were continuing.
“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,” the company said after Macarthur’s announcement this morning.
“Peabody believes that its proposal can deliver a superior outcome for all Macarthur shareholders and is disappointed with the Macarthur board’s initial reaction.
“Peabody remains open to engaging with the Macarthur board to progress its proposal.”
US-based Peabody is a major Queensland coal producer with five operations in the state – the North Goonyella longwall mine and the Burton, Eaglefield, Millennium and Wilkie Creek open cut mines.
The company recently applied for federal government environmental approval of an expansion to Wilkie Creek in the Surat Basin, to lift raw coal production capacity from 2.3 million tonnes per annum to 10Mtpa.
Peabody has majority interests in more than 30 US mines.
Macarthur aims to kick off mining under its Middlemount stage 2 expansion to 5.4Mtpa in mid-2011, while working to meet its forecasted sales tonnage of 4.8-5Mt for the 2010 financial year despite recent weather-caused setbacks.
Shares in Macarthur, a leading pulverised coal injection coal producer, were up a whopping 16.2% to $14.05 yesterday, outpacing Peabody’s offer by more than $1 as investors swoop in on the possibility of a bidding war.
This morning they were up another 3.1% to $14.48.
