Following due diligence, Peabody and ArcelorMittal attempted to negotiate a bid implementation agreement with Macarthur, Peabody said yesterday.
However, Macarthur was “not willing to engage on a BIA in customary terms” even with Peabody and ArcelorMittal’s willingness to improve the price from the original proposal if such a BIA could be agreed.
“As a result, a formal offer was submitted to Macarthur, valuing the company at $15.66 per share (inclusive of the dividend) without a BIA while seeking a recommendation. The Macarthur board declined to recommend this offer,” Peabody said.
Peabody global chief executive Gregory Boyce was more forthright in his response.
“Peabody and ArcelorMittal believe our bid is compelling,” he said. “And we have decided to take this attractive offer directly to Macarthur shareholders to provide them with significant value.”
Macarthur Coal chief executive Nicole Hollows told a conference call that the company would remain in discussion with Peabody and ArcelorMittal as well as any other potential acquirers for the company.
"We do not currently consider the bid to be hostile," Hollows told the conference call.
Should the offer be successful, Macarthur will form an integral part of Peabody Australia and expand ArcelorMittal’s mining interests in the key resource market of Australia.
Peabody would seek to continue its run of strong results and increase its exposure to the Asia Pacific Rim “supercycle” with its bid for Macarthur Coal, after reporting a 41% increase year-on-year in June quarterly operating profit to $US458 million, Boyce said after announcing the company’s results last month.
He said Peabody, which reported 21% higher revenues for the quarter year-on-year of $US2.01 billion, was enjoying strong prices for its export coal from its Queensland operations and would look for further acquisitions to increase its presence in Asia.
Yesterday Peabody was also attempting to reassure Macarthur employees about the takeover.
“Both Peabody and ArcelorMittal acknowledge and value the contribution that Macarthur employees will make to the ongoing operations and growth plans,” the company said.
The latest proposed takeover for Macarthur Coal by Peabody Energy and ArcelorMittal bid vehicle BidCo was opportunistic, Macarthur chairman Keith DeLacy said yesterday.
“The BidCo offer appears to be an opportunistic attempt to acquire Macarthur at a time of global economic volatility and regulatory uncertainty in Australia, and fails to reflect Macarthur’s industry-leading position and the growth potential of its unique assets,” he said.
“Macarthur has a portfolio of high quality producing, development and exploration assets in the highly prospective coal basins of Queensland which are not easily replicable.
“Furthermore, with access to valuable export port capacity in an increasingly infrastructure constrained environment, Macarthur believes it is well positioned to meet its stated objective of reaching production of 9.2 million tonnes per annum by FY 2014, with significant opportunities for further growth.
“The board of Macarthur believes that there is no reason for shareholders to take any action in relation to the BidCo offer at this time.”
