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Peabody Energy Lifts Macarthur Coal Bid To US$3.8 Bln - Update

Peabody Energy 04152010 1

Coal miner Peabody Energy Corp. (BTU) Thursday raised its offer to acquire Australia's Macarthur Coal Ltd. (MCC.AX) to A$4.1 billion, or US$3.8 billion. Peabody's sweetened offer came a day after Macarthur rejected an improved bid with a cash option from rival New Hope Corp. Ltd. (NHC.AX,NHPEF.PK), saying the revised offer does not represent an adequate premium for control of the company and the cash alternative is capped at only A$950 million.

Under the Peabody's improved and definitive proposal, aiming at a controlling interest, Macarthur shareholders would get A$16 per share in cash, representing a 39% premium to A$11.48 per share, the 30-day volume-weighted average share price up to March 30, 2010. The boosted offer is 36% above its average net asset value of A$11.75 per share determined by research analysts.

St. Louis-based Peabody, which already increased its offer for Brisbane-based Macarthur earlier, said its latest offer is greater than New Hope's boosted cash and share of A$14.50 per share. Peabody's proposal is also superior to Macarthur's proposed takeover offer for its smaller rival Gloucester Coal Ltd. (GCL.AX) and associated transactions with Noble Group Ltd. (NOBGF.PK) and other proposals that Macarthur has disclosed.

Peabody said it is prepared to offer cash to all Macarthur shareholders and remains willing to provide any, or all, of Macarthur's three major shareholders with the opportunity to retain their economic interest in Macarthur should they so desire.

Peabody's proposal is subject to a limited, confirmatory due diligence period of up to five days, primarily focused on the terms of material contracts, including potential change in control provisions, and would lapse if Macarthur proceeds with the shareholder vote scheduled for April 19 or if the Gloucester/Noble Group transactions proceed.

It was on March 31 that Peabody Energy first announced that it was on talk to acquire Macarthur for A$13 per share in cash, representing a total equity value of A$3.3 billion or US$3.0 billion, but Macarthur rejected the offer saying it is highly conditional and does not fully value Macarthur and its significant growth prospects. Later on April 5, Peabody sweetened its offer for Macarthur by a dollar to A$14 per share in cash, which was also rejected by Macarthur saying the revised offer does not represent an adequate premium for control of the company.

Meanwhile, New Hope entered the fray earlier this month with an all stock alternative proposal to acquire Macarthur, saying it is superior to a rival all cash offer from Peabody. New Hope has offered 2.7 of its shares for each Macarthur share by way of a scheme of arrangement valuing Macarthur at A$14.58 per share or A$3.71 billion.

Meanwhile, Macarthur is trying to acquire Gloucester Coal, in which 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. Further, in late January, Macarthur said it has 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 Coal's major assets are a 73.3% share in Coppabella Mine and Moorvale Mine through the Coppabella & Moorvale Joint Venture and a 74.66% share of the Middlemount Mine project. The Middlemount Mine project is an incorporated joint venture with Paway Ltd., part of the Noble Group.

It was in July 2001, Macarthur undertook an initial public offering to retire debt and provide for future growth at $128 million market capitalisation. At present, Macarthur employs around 270 people directly and more than 320 people through contractors.

In Wednesday's regular trading session, BTU closed trading at $47.86 per share on the NYSE. In the past 52-week range, share had been trading in the range of $23.56 to $52.14 on a three-month average volume of 6.27 million shares.

MCC.AX is currently trading at A$15.28 per share, down A$0.22 or 1.42% on a volume of 4.91 million shares on the Australian Stock Exchange, while NHC.AX is currently trading at A$5.22 per share, up A$0.07 or 1.36% on a volume of 2.08 million shares.

In Wednesday's regular trading session, NHPEF.PK closed trading at $4.90 per share.

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