March 5, 2021

DealBook: Macarthur Bows to Raised Peabody and Arcelor Bid

An excavator loads coal at Macarthur Coal's Moorvale mine located about 466 miles northwest of Brisbane, Australia.Macarthur Coal, via ReutersAn excavator loads coal at Macarthur Coal’s Moorvale mine located about 466 miles northwest of Brisbane, Australia.

Macarthur Coal, an Australian mining company that has been the subject of multiple takeover bids over the last year and a half, bowed on Tuesday to an improved offer from ArcelorMittal and Peabody Energy valuing Macarthur at about 4.8 billion Australian dollars, or $5.2 billion.

The company, a specialist producer of pulverized coal that is sought after by steel makers, is one of the last remaining independent midsize miners in Australia and had long been considered an attractive acquisition target.

Rising raw material prices and a desire by resource companies and steel makers to meet ravenous demand from China and other rapidly growing emerging economies have spurred consolidation in the sector in recent years. Macarthur, based in Brisbane, last year turned down two bids by rivals and a major asset swap plan with another company.

Last month, it spurned a fresh offer by ArcelorMittal and Peabody of 15.5 dollars a share, prompting the pair to take their bid directly to shareholders on Aug. 1. ArcelorMittal, with $78 billion in annual revenue, already holds a 16 percent stake in Macarthur.

At the time, Keith DeLacy, chairman of Macarthur, said the bid appeared to be an “opportunistic attempt” to acquire the miner at a time of global economic volatility and regulatory uncertainty in Australia.

The country is considering implementing a carbon tax and a resource tax, both of which would affect the mining sector.

On Tuesday, Peabody Energy, based in St. Louis, and ArcelorMittal nudged up their joint offer by 3 percent, to 16 dollars a share. The bidders are seeking at least 50.01 percent of the coal miner. The new offer is 44 percent above the stock’s closing price on the day before the initial offer was announced.

“In the period since the initial offer, a number of parties have conducted due diligence,” Macarthur said in a statement on Tuesday, adding that the company’s board was recommending the raised bid to Macarthur shareholders. “Although it remains possible that a superior proposal might be made, none have emerged to date and there can be no assurances that any will emerge.”

Investors seemed to concur. Macarthur shares closed at 15.86 dollars in Australia on Tuesday, indicating that the market was not betting a higher bid would materialize.

“This is a major step forward in our acquisition process,” Gregory H. Boyce, the Peabody chairman and chief executive, said in a statement.

The offer, which is subject to regulatory approval, is one of the largest so far this year in the mining sector, which has been a hot bed of deal-making activity.

Yanzhou Coal Mining, a Chinese company, bought Felix Resources for 3.5 billion dollars in 2009, for example, while Minmetals bought most of the assets of the Australian miner Oz Minerals. Also in 2009, Hunan Valin Iron and Steel Group took a stake in the Fortescue Metals Group, an Australian iron ore miner, for $438 million.

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