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Australia's New Hope Offers To Acquire Macarthur Coal For A$3.71 Bln Stock - Update

Australian coal producer New Hope Corp. Ltd. (NHC.AX,NHPEF.PK) has now entered the fray with an all stock alternative proposal to acquire rival Macarthur Coal Ltd. (MCC.AX,MACDF.PK), saying it is superior to a rival all cash offer from U.S. coal miner Peabody Energy Corp. (BTU). New Hope has offered 2.7 of its shares for every each Macarthur share by way of a scheme of arrangement valuing Macarthur at A$14.58 per share or A$3.71 billion.

The Macarthur board has advised that its shareholders should "take no action" in regard to the highly conditional proposal as they are assessing the merits of the proposal. Like the Peabody offer, the New Hope bid also requires Macarthur to abandon its all-stock bid for Gloucester Coal Coal Ltd. (GCL.AX) and associated transactions with Noble Group Ltd. (NOBGF.PK).

New Hope's A$14.58 per share all-stock offer triumphs Peabody Energy's sweetened all-cash offer of A$14.00 per share, which was rejected as it did not reflect a superior proposal. It is also believed to be superior to Macarthur's favored plan of proceeding with a takeover with Noble Group. The New Hope offer also represents a 50% premium to the A$9.70 per share price at which Macarthur agreed to issue shares to Noble Group in relation to the Gloucester takeover offer.

Earlier, Peabody offered to acquire Macarthur for A$13 per share in cash, which was rejected by Macarthur Coal's board saying the proposal is highly conditional and does not fully value Macarthur and its significant growth prospects.

Meanwhile, Macarthur has reportedly indicated that a A$15 per share cash offer could engage them in talks, while Morgan Stanley (MS) reportedly said that the offer may need to approach A$16 per share. Peabody has reportedly indicated it was prepared to further sweeten its offer for Macarthur.

Reports also suggest that Macarthur is being approached by U.K.-based global diversified mining group Xstrata Plc., which had abandoned an earlier acquisition offer for the company in 2008. Xstrata is said to be in talks with steel makers ArcelorMittal SA (MT) and POSCO (PKX), two of the three largest shareholders of Macarthur along with CITIC Australia Coal Pty Ltd. CITIC has a 23.4% stake in the company, and steel makers ArcelorMittal and South Korea's POSCO hold 16.6% and 10.0% stake, respectively. Both ArcelorMittal and Posco paid A$20 per share for stakes in Macarthur in June 2008.

However, the Macarthur board confirmed that it has not received any approach from Xstrata or its representatives. Reports suggest that Xstrata is waiting for a Takeovers Panel decision on whether to delay the Monday Macarthur shareholder vote.

Peabody, the world's largest private-sector coal company, had urged Macarthur's board to delay the shareholders meeting of April 12 to provide its shareholders the opportunity of making an informed choice between proceeding with the Gloucester and associated transactions with Noble Group, or endorsing a sweetened 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.

On Wednesday, Peabody also applied to Australia's Takeovers Panel to order a postponement of the meeting of Macarthur shareholders saying that Macarthur failed to provide shareholders with information about its revised bid in order to compare the relative merits of the revised Peabody proposal and the Gloucester/Noble transactions.

The Macarthur board has now recommend that shareholders vote in favor of the resolution at the Macarthur Shareholders' Meeting scheduled for April 12 and has determined not to defer that meeting. However, if Macarthur proceeds with its shareholders' meeting on April 12 and the resolution is approved, it will mean that Macarthur's takeover offer for Gloucester and the associated transactions with Noble Group are likely to proceed, and in which case Peabody's proposal will lapse.

This voting will approve the proposed issue of Macarthur Coal shares to Noble Group under the takeover of 100% of Gloucester Coal, the acquisition of Noble's interest in the Middlemount Coal joint venture and the acquisition of marketing rights for Middlemount coal.

In late January, Macarthur said it entered into other conditional agreements with Noble. Under all of these transactions, Noble would acquire up to 24.6% of Macarthur and become its largest shareholder.

Macarthur was trying to acquire Gloucester, in which Hong Kong-based commodity supplier Noble Group is the largest shareholder with an 87.7% stake. Macarthur offered to acquire Gloucester in December 2009 for A$8.16 per share and Noble said it would only accept Macarthur's shares for selling its stake in Gloucester.

Meanwhile, Noble has Monday made a A$12.60 per share all cash offer for Gloucester's remaining 12.3% shares Noble does not already own, representing a 35.3% premium to the closing price of Gloucester on April 1 of A$9.31.

Macarthur is a leading producer of low-volatile PCl metallurgical coal. It holds a 73.3% interest in its two key mines, Coppabella and Moorvale, both located in the Bowen Basin, Queensland. Both mines principally produce PCI coal, a partial substitute for coking coal in steel making. The company controls 145 million tons of reserves and 1.3 billion tons of resources. It has current production capacity of over 5 million tons per year, with growth potential from mines in development.

BTU closed Thursday's regular trading session at $46.12, down $1.03 or 2.18% on a volume of 5.99 million shares, lower than the three-month average volume of 6.23 million shares. MACDF.PK closed at $13.15, down $0.35 or 2.59% on a volume of 1,070 shares, and MACDF.PK traded last at $4.45 on March 25.

Meanwhile, in Friday's regular trading session on the Australian Securities Exchange, MCC.AX is currently trading at A$15.62, up A$1.26 or 8.77% on a volume of 4.25 million shares, while NHC.AX is currently trading at A$5.30, down A$0.01 or 0.19% on a volume of 0.38 million shares.

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