Australian coal producer rejects $3 billion Peabody offer
Peabody Energy Corp. is taking its bid for Macarthur Coal Ltd. to the company’s major shareholders after the Australian coal producer’s board rejected a $3 billion cash takeover bid.
"Peabody’s proposal is highly conditional and does not fully value Macarthur and its significant growth prospects," Macarthur Chairman Keith DeLacy said Wednesday in a statement.
Peabody, the world’s largest private-sector coal company, has rapidly expanded operations in Australia since buying its first mine there six years ago. Last year, the company said it plans to double coal exports from the country by 2014.
The company on Wednesday said it is "disappointed" with the initial rejection and believes Macarthur’s assets and growth prospects are a good fit with its existing Australian operations.
Brisbane-based Macarthur produced about 4.6 million tons of so-called metallurgical coal last year from two Queensland mines and is in the midst of an expansion. The company, which owns 145 million tons of reserves, supplies coal to steel mills in Asia, Europe and Brazil.
Peabody’s offer values Macarthur at about $680 per ton of production and $21 per ton of reserves, according to Jefferies & Co. analyst Michael Dudas.
"We believe the initial bid is the first step in a long, complex negotiating process involving numerous players in the coal and steel industry," Dudas said in a research note.
Peabody said it is currently in discussions with Macarthur’s three largest shareholders, who collectively own 47 percent of the company.
Peabody said its offer is conditional on Macarthur calling off an earlier agreement to purchase rival Gloucester Coal Ltd., which is 88-percent owned by Asian commodities firm Noble Group Ltd.
Macarthur is holding a meeting on April 12 for shareholders to vote on whether to issue shares to complete the Gloucester deal.
Peabody said its bid is 34 percent higher than the price of Macarthur shares to be issued to Noble as part of the Gloucester agreement. It is also higher than a February valuation by an independent expert hired by Macarthur, Peabody said.