ArcelorMittal, the world’s largest steelmaker, and Peabody Energy Corp. said they approached Macarthur Coal Ltd. with an offer that values the Australian coal producer at A$4.7 billion ($5.1 billion).
ArcelorMittal and Peabody, the biggest U.S. coal miner, plan to bid through a jointly owned company, offering A$15.50 a share, Macarthur said today in a statement. That’s 40 percent more than today’s close. ArcelorMittal holds about 16 percent of Macarthur, the largest exporter of pulverized coal used by steelmakers, it said in a statement.
Buying Macarthur would give the pair ownership of mines in Queensland state, the biggest exporter of the fuel, as prices trade near a record. The bidders will likely seek the support of China’s Citic Group and South Korea’s Posco, which own 22.78 percent of Brisbane-based Macarthur between them.
The offer “puts the rest of the sector firmly back as takeover targets,” Colin McLelland, a resources analyst at Investec Bank Australia Ltd., said by phone from Sydney. “It’s not clear what Citic will do, I suspect they will just hold their stake.”
Macarthur fell 2.8 percent to A$11.08 at the 4:10 p.m. close of trade in Sydney and before the approach was announced, taking losses this year to 13 percent. Luxembourg-based ArcelorMittal declined 1.4 percent to 23.665 euros at 4:11 p.m. local time in Amsterdam trading.
Macarthur’s board will “seek to engage with Peabody and ArcelorMittal in relation to the price and terms,” the company said in the statement.
The proposal is “non-binding and conditional on the successful completion of due diligence, which would be completed in a timely manner,” St. Louis-based Peabody said in a statement. A condition of any offer would be a minimum 50.01 percent acceptance as well as Australian foreign investment approvals, Peabody said.
“We believe there is significant value that can be created by managing Macarthur’s portfolio of coal assets,” Greg Boyce, chief executive officer of Peabody, said in the statement. Macarthur controls total coal reserves of 270 million tons and total resources of 2.3 billion tons, according to Peabody.
It’s the second time Peabody, the largest U.S. coal producer, has bid for Macarthur, which rejected its A$3.8 billion, or A$15 a share, approach in May last year. Macarthur ended transaction talks with Arcelor in June 2008 after the steelmaker bought a 14.9 percent stake the previous month.
“The bidders keep hitting them with the same number each time, more or less, so at least there is some consistency,” said Prasad Patkar, a money manager who helps oversee about $1.7 billion at Platypus Asset Management Ltd. in Sydney. “My gut feeling is that the board will be more engaged this time around.”
The bid will be made through a venture 40 percent owned by ArcelorMittal and 60 percent by Peabody, the two companies said in separate statements today.
Citic hasn’t decided whether to accept the joint offer, said Calvin Lam, investor relations head at Citic in Hong Kong.
Peabody and Arcelor are bidding about 8.7 times Macarthur’s projected earnings before interest, tax and depreciation, according to Bloomberg calculations based on the median of 17 analyst estimates. That compares with an Ebitda multiple of 15 for coal takeovers involving Australian companies in 2010, according to data compiled by Bloomberg.
Macarthur is being advised by J.P. Morgan Australia Ltd. and Corrs Chambers Westgarth. ArcelorMittal said it’s being advised by RBC Capital Markets and Mallesons Stephen Jaques. UBS AG, Bank of America Merrill Lynch and Freehills are advising Peabody.
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