Macarthur Coal Rises After A$4.7 Billion Takeover Proposal

Macarthur Coal Ltd. (MCC), the world’s biggest producer of pulverized coal, surged the most in 10 years in Sydney trading following a A$4.7 billion ($5 billion) takeover proposal from ArcelorMittal (MT) and Peabody Energy Corp. (BTU)

Macarthur rose 37 percent to A$15.14 at the 4:10 p.m. close, the most since July 5, 2001. ArcelorMittal, the world’s largest steelmaker, and Peabody yesterday jointly offered A$15.50 a share, less the amount of any final dividend, which is estimated at 19 cents, according to data compiled by Bloomberg.

Buying Macarthur would give ArcelorMittal, its second- largest shareholder, and Peabody mines producing steelmaking coal in Australia, the world’s biggest exporter, as prices trade near a record and suitors vie for targets. Peabody’s A$3.8 billion offer last year for Macarthur failed after major shareholders, including China’s Citic Group, rejected the bid.

“The structure this time makes it more likely the deal will go ahead,” Cameron Peacock, market analyst at IG Markets Ltd., said by phone. “The board would have a hard time going to their shareholders and not recommending this.”

The proposal, along with Hong Kong billionaire Li Ka- shing’s bid for a U.K. water utility and a Malaysian oilfield services merger have combined to set up July to become the biggest month for deals in the industries for four years, according to data on the Bloomberg.

Whitehaven Coal Ltd. (WHC) rose 2.5 percent to a two-month high and Aston Resources to the highest level since June 22. This compares with a drop of 1.9 percent in the S&P/ASX 200 benchmark index.

Carbon Tax

The bid for Brisbane-based Macarthur, coming a day after Australia unveiled a proposed A$23 a metric ton carbon tax, only needs to be accepted by at least 50.01 percent of shareholders, St. Louis-based Peabody and Luxemburg-based ArcelorMittal said yesterday in a statement. Citic owns 24.3 percent of Macarthur, ArcelorMittal 16.2 percent and Posco 7.1 percent as at March 31, according to a company filing.

“The fact they’ve teamed up with Arcelor, which is already a large shareholder, really means you only need 34 percent of the shares to get this across the line,” Peacock said. “The bid with the second largest shareholder on board and low minimum acceptance level, probably makes it harder for rival bids.”

Rio Tinto Group this month completed a $3.4 billion takeover of coal developer Riversdale Mining Ltd., acquiring the stakes of its three major shareholders, including Tata Steel Ltd.’s 26.28 percent holding, using a similar 50.1 percent minimum acceptance strategy..

Macarthur was the subject last year of competing bids for control from Peabody, New Hope Corp. and Noble Group Ltd. An investment bank acting for Xstrata Plc (XTA) in April 2010 also had approached a “substantial” Macarthur shareholder, Macarthur said last year. Macarthur ended transaction talks with ArcelorMittal in June 2008 after the mill bought a 14.9 percent stake.

“This proposal is the first to have the support of one of Macarthur’s three major strategic shareholders,” JPMorgan Chase & Co. analysts, led by Anthony Passe-de Silva said yesterday in a report.

‘Pure Play’

Peabody and ArcelorMittal are offering about 8 times Macarthur’s estimated 2012 earnings before interest, depreciation, tax and amortization, “in line with the current average for pure play coal companies,” Bank of America Merrill Lynch said yesterday in a report. PT Bumi Resources is trading on 8.4 times estimated Ebidta, while Gloucester Coal Ltd. is trading at 7.3 times, according to Merrill Lynch forecasts.

There were $9.4 billion worth of coal takeovers of Australian companies and assets in 2010, more than double the level of the year before, Bloomberg data shows. Thailand’s Banpu Plc paid $1.8 billion for Centennial Coal Co. last year and China’s Yanzhou Coal Mining Co. bought Felix Resources Ltd. for A$3.1 billion in 2009.

Macarthur, forecast to earn A$321 million for the year ending June 30, according to the median estimate of 11 analysts surveyed by Bloomberg, plans to double production from 2009 levels by 2014 through the development of the Middlemount mine and one other project, bringing its operations in Queensland state to four.

Macarthur is being advised by J.P. Morgan Australia Ltd. and Corrs Chambers Westgarth. ArcelorMittal is advised by RBC Capital Markets and Mallesons Stephen Jaques. UBS AG, Bank of America Merrill Lynch and Freehills are advising Peabody.

To contact the reporter on this story: Elisabeth Behrmann at Ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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