The coal market is heating up in Asia, and North American companies are struggling to capture some of the growth in the region. Australian companies like Macarthur Coal have been able to capitalize on the Chinese need for natural resources. Peabody has entered a bidding war with Noble Energy for Macarthur Coal. The company increased its offer by $300 million from $3.27 to $3.57 billion. Analysts are waiting for the Macarthur’s shareholder meeting on April 12th…
According to Businessweek, “Peabody Energy Corp., the biggest U.S. coal company, increased its takeover offer for Macarthur Coal Ltd. by 8 percent to A$3.56 billion ($3.27 billion) after the Australian company rejected the first bid.
Peabody offered A$14 cash a share, it said in a statement, from A$13. Macarthur, which last traded at A$14.87 before it was halted, last week rejected the initial offer because it didn’t value its expansion plans.
The offer may thwart Noble Group Ltd.’s attempt to become Macarthur’s biggest shareholder in a stock swap for the Hong Kong-based commodity supplier’s Gloucester Coal Ltd. Peabody operates eight mines in Australia’s Queensland and New South Wales states, and is seeking more to feed power stations and steel mills in China, the world’s largest user of coal.
ArcelorMittal, the world’s biggest steelmaker, holds 16.6 percent of Macarthur and South Korea’s Posco owns 8.3 percent, according to data compiled by Bloomberg. Citic Australia Coal Ltd. has 22.4 percent. Peabody is offering alternatives to Macarthur’s three major shareholders should they wish to maintain their holdings in the company.
Macarthur is the world’s biggest supplier of pulverized coal used by steelmakers. Peabody wants Macarthur to delay an April 12 shareholder meeting when investors will vote on the Gloucester and Noble deal.
Separately, Noble backed by China’s $300 billion sovereign wealth fund, moved to secure full ownership of Gloucester by offering A$127 million, or A$12.60 a share, for the 12.3 percent of Gloucester it doesn’t own, Singapore-based Noble said today in a statement. Gloucester, halted from trading in Sydney, last traded on April 1 at A$9.31.”
According to Peabody, “This represents: a 44% premium to A$9.70 per share, the price at which Macarthur agreed to issue shares to Noble Group in relation to the Gloucester takeover offer (and provide board representation);
a 39% premium to A$10.04 per share, the closing share price of Macarthur on 25 February 2010, just prior to the release of the Lonergan Edwards Independent Expert’s Report;
up to a 42% premium to the valuation range for Macarthur determined by the Independent Expert, based on a 100% controlling interest; and
a 22% premium to A$11.48 per share, which was the 30-day volume-weighted average share price through 30 March 2010, when Macarthur announced Peabody’s original proposal.
Peabody has also reduced the conditionality of the proposal. While Peabody continues to offer alternatives to the three major shareholders to retain their original interest in Macarthur, Peabody’s offer is not contingent on their commitment provided the Macarthur Board supports our proposal.
Peabody today repeated its request to the Macarthur Board to delay its 12 April 2010 shareholders’ meeting, so that its shareholders may have the opportunity to consider Peabody’s proposal and realize a cash premium for their shares.
If the 12 April 2010 meeting proceeds and the resolution is approved, it will mean the Gloucester takeover offer and associated transactions with Noble Group are likely to proceed, in which case Noble Group will receive shares at a significant discount to the current price and Peabody’s proposal will lapse. Macarthur shareholders would then lose any potential opportunity to benefit from Peabody’s proposal.
Peabody believes the takeover offer for Gloucester and the associated transactions with Noble Group are not in the best interests of Macarthur shareholders. In particular, Peabody believes:
Macarthur is paying too much for Gloucester. Based on Peabody’s indicative offer price, Macarthur’s offer for Gloucester is valued at nearly A$1 billion. This is more than 40% higher than the mid point of the Independent Expert’s valuation of Gloucester and 26% above the top end of the valuation range determined by the Independent Expert. It would result in Gloucester’s shareholders receiving the majority of the benefits of the transaction;
Noble Group will receive Macarthur shares at a significant discount, becoming its largest shareholder and holding a position of significant influence. Macarthur is proposing to issue shares to Noble Group at A$9.70 per share; Peabody’s proposal is 44% above this price;
While the Independent Expert appointed by Macarthur concluded that the proposed issue of shares to Noble Group was reasonable, it also determined the offer was not fair based on a relative valuation assessment. Peabody believes that Noble Group’s proposed ownership interest in Macarthur would provide a blocking stake, further reducing the likelihood of any future premium offer for Macarthur shares.
Peabody believes its proposal is superior. Peabody’s indicative offer price of A$14.00 per share is more than 12% above the highest value for Macarthur that was determined by the Independent Expert, on a 100% controlling interest basis.
Peabody continues to urge Macarthur’s board to delay the 12 April shareholders meeting to provide its shareholders the opportunity of making an informed choice between proceeding with the Gloucester takeover offer and associated transactions with Noble Group, or endorsing a proposal from Peabody that would deliver a cash premium for their shares. Peabody believes it is in the best position to deliver a superior outcome for Macarthur shareholders.
According to Bloomberg, “Gloucester Coal Ltd., an Australian producer controlled by Noble Group Ltd., said it expects its largest shareholder to make an offer to buy the company.
Noble, which had earlier agreed to swap its stake in Gloucester for shares in Macarthur Coal Ltd., holds 87.7 percent of Gloucester, the Sydney-based company said today in a statement requesting a trading halt.
The bid comes after Peabody Energy Corp., the biggest U.S. coal company, last week offered A$3.3 billion ($3 billion) in cash to buy Macarthur Coal Ltd., the biggest exporter of pulverized coal used by steelmakers. Brisbane-based Macarthur rejected Peabody’s offer saying it fails to value its expansion plans.
Macarthur shares were halted from trading in Sydney today pending the release of an announcement about Peabody’s “interest” in the company, it said.”