If successful the takeover will consolidate Peabody’s footprint in Queensland and position it as a dominant Asian player after it won the rights to co-develop the giant Tavan Tolgoi coal project in Mongolia.

"We believe there is significant value that can be created by managing Macarthur's portfolio of coal assets using Peabody's industry-leading operating, development and commercial skills,” Peabody chairman and chief executive officer Greg Boyce said.

Under the proposal to acquire all of Macarthur shares, Peabody and ArcelorMittal will own 60% and 40%, respectively.

Macarthur shareholders, in turn, would be offered a cash price of $A15.50 per share, a 40% premium to the company’s close on Monday. The new company would have a relevant interest of about 16% in Macarthur's shares.

The non-binding proposal issued to Macarthur’s board hinges upon the successful completion of due diligence.

Peabody is confident of succeeding in this bid after failing last year in a battle that drew in both global and Queensland based coal players, and was eventually blocked by Macarthur major shareholder Citic Resources.

It also coincided with the controversy over the super profits tax, which prompted Peabody to drop its offer from $16 a share to $15 a share.

But speculation is already mounting that this bid will be challenged by Rio Tinto, which has just successfully wrapped up its $A3.9 billion takeover of Mozambique coking coal producer Riversdale, or Xstrata who was thwarted in last year’s takeover stoush for Macarthur by shareholder Posco.

Citic Resource Holdings owns 24.6% of Macarthur, ArcelorMittal has 16% and South Korean steel group Posco has 7%.

Should an offer result, Macarthur shareholders would be subject only to a minimum 50.01% acceptance, the company said, as well as approval by Australia's Foreign Investment Review Board and other customary approvals and conditions.

The Construction Forestry Mining and Energy Union said the Peabody bid proved Australia's coal industry was still attractive under the new carbon pricing scheme.

"The coal industry tells one story to the public with their scare campaign and another story to the markets," CFMEU president Tony Maher reportedly told the ABC.

"We know what's happening and the workers know what's happening. They listen to these scare campaigns and they see their mine is doubling in capacity, the ports are doubling in capacity. So it's all a nonsense."

Peabody, based in Missouri, has long been progressing on an aggressive international growth strategy, and has previously said it would double its Australian presence.

ArcelorMittal chief financial officer and group management board member Aditya Mittal said: "ArcelorMittal has been a long-term investor in Macarthur, and we look forward to discussing our proposal with the board of Macarthur."

Macarthur, according to Reuters, has not yet made recommendation on the proposal and said it would pursue discussions with the pair on a deal price as well as terms.

“Shareholders should take no action in relation to the indicative proposal or any documentation received from Peabody or ArcelorMittal until they receive further communications from the board,” Macarthur said.

Peabody has engaged UBS and Bank of America Merrill Lynch as financial advisers for the potential transaction, as well as Freehills, which will serve as legal advisers.

ArcelorMittal has engaged RBC Capital Markets as financial adviser and Mallesons Stephen Jaques as legal adviser.