Australian miner Macarthur Coal Ltd. (MCC.AU) has Tuesday
rejected a A$3.8 billion takeover offer from Peabody Energy Corp.
(BTU), which it said was opposed by its biggest shareholder and was
unlikely to succeed.
Peabody last week lowered its offer, in part on the prospect of
the Australian Government's proposed 40% Resource Super Profits
Tax, and Macarthur Chairman Keith De Lacy said the uncertainty
surrounding the tax was stifling corporate deals in the sector.
"It has created a climate of uncertainty that means corporate
transactions of this nature will be very difficult to consummate,"
he told Sky Business.
BBY analyst Gavin van der Wath agreed that the prospect of the
new mining tax was putting a dampener on previously red hot
dealmaking in the Australian mining sector.
"Everybody is just stepping back now and saying, 'let's look at
things again' and it is a problem for anybody trying to sell any
mining asset anywhere in Australia at the moment," he said.
The rejection of Peabody's bid looks likely to bring to an end
five months of corporate maneuvering around the Brisbane-based
miner, which began with its now abandoned takeover offer for
Gloucester Coal Ltd. (GCL.AU) and associated transactions with
Noble Group Ltd. (N21.SG).
Macarthur's shares tumbled in the wake of the rejection and
analysts said many shareholders would be disappointed they could
not take advantage of Peabody's offer but that the company was
still well placed as a major exporter of a premium product into
strong Asian steel markets.
Peabody last week lowered its prior offer pitched at A$16 per
Macarthur share to A$15 a share after carrying out due diligence
and factoring in the potential impact of the Australian
government's proposed 40% Resource Super Profits Tax.
"The Macarthur board has met today and considered Peabody's
further proposal and formed the view that based on the price and
the conditions of the proposal, that it cannot reasonably be
recommended to shareholders," Macarthur said in a statement.
The takeover target also said that after consulting with its
three major shareholders--Citic Resources Holdings Ltd. (1205.HK),
ArcelorMittal (MT) and Posco (005490.SE)--it had concluded that the
takeover by scheme of arrangement was unlikely to receive the 75%
shareholder approval it needed to succeed.
Citic, which is Macarthur's biggest shareholder with a 22.4%
stake, provided the miner with written advice that it did not find
the Peabody offer attractive, and that the long-term strategic
value of the company was significantly greater than the cash on
offer.
"The proposed terms of a shareholder agreement tabled by Peabody
in March 2010 are not acceptable to Citic," the Chinese group said
in an excerpt of the advice it gave to Macarthur.
One person close to Macarthur said ArcelorMittal, which has a
16.6% stake, has also raised concerns about the Peabody offer.
Macarthur does not believe the due diligence carried out by
Peabody threw up any issues that justified the reduction in its
offer and De Lacy said the company was not willing to accept a
discount based on the proposed new tax.
"Macarthur Coal is not prepared to take a discount on the basis
of a tax which to me seems to be turning into a fiasco, which
cannot be delivered in its current form and the way things are
going, may never be delivered," he said.
Macarthur shares fell sharply on news of the rejection of the
Peabody offer, ending down 16% at A$11.25.
Peabody said it was disappointed with Macarthur's decision to
turn down its offer, which it said had offered a clear and
significant premium for the company.
"Based on the recent trading activity in Macarthur, it is
apparent that the market recognizes the premium that Peabody was
offering," Peabody said in a statement.
"It is also unfortunate that one shareholder could block a
proposal that would have created significant value for all
Macarthur shareholders."
Unless the U.S. coal group changes its mind and decides to again
lift its offer, the five months of corporate wrangling around
Macarthur may well be over, with the miner to continue in its
current form with its three major shareholders retaining stakes
that make a takeover difficult.
On Dec. 22 last year, Macarthur announced its plans for a
share-based takeover of Gloucester Coal and the associated purchase
of a 25% stake in the Middlemount mine from Gloucester's majority
owner Noble.
Macarthur, the world's biggest exporter of pulverised, or PCI,
coal used in steelmaking, said the deal would give it scale and the
diversity it needed to avoid a repeat of the turbulence of 2009,
when a drop off in PCI demand rocked the miner.
But not all investors were convinced, with some worrying about
the dilution of Macarthur's weighting to higher margin
metallurgical coals.
Peabody took the initiative on March 31, making an initial
approach pitched at A$13 a share that prompted a rival cash and
share offer from New Hope Corp. (NHC.AU) and speculation that
mining giant Xstrata Plc (XTA.LN) could also enter the fray.
Macarthur's eventual decision to delay a vote on the Gloucester
deal while it considered an increased offer from Peabody saw Noble
withdraw its support for the Gloucester and Middlemount deals.
And now, with Peabody and New Hope's offers rejected and a bid
from Xstrata failing to materialize, Macarthur looks set to
continue life in its current form, with perhaps the only major
beneficiaries of the convoluted process being the corporate
advisers to the various parties.
Posco declined to comment.
-By Alex Wilson, Dow Jones Newswires: 613-9292-2094;
alex.wilson@dowjones.com (Kyong-Ae Choi in Seoul contributed to
this article)
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