Coal miner Peabody Energy Corporation (BTU) and the steel giant ArcelorMittal SA (MT) enhanced their joint offer to acquire all of the shares of Macarthur Coal Limited (“MCC”). The increased offer has been accepted by the members of Macarthur Board. Macarthur Coal is the world's largest producer of seaborne low volatile pulverized coal injection.
In July 2011, an offer was made through PEAMCoal to acquire all the outstanding shares of MCC. The initial offer price was AU$15.50 per share, which reflected a premium of 39.9% to MCC's traded price of AU$11.08 on July 11, 2011. PEAMCoal is a joint venture between Peabody and ArcelorMittal with respective stakes of 60% and 40%.
Macarthur Coal rejected the AU$15.50 per share initial offer considering it to be inadequate for an industry leader. The company mentioned that the joint bid takes undue advantage of the global economic volatility, without paying true value for its unique assets. Macarthur further clarified that they can accept an offer of AU$16.00 per share.
Initially, PEAMCoal refused to agree on the AU$16 bid price but later accepted the conditions set by the Macarthur Board. Accordingly, it offered a renewed bid for Macarthur Coal. The new offer of AU$16.00 per share reflects a premium of 44.0% to the traded price of AU$11.08 on July 11, 2011. The total value of the offer is pegged at AU$4.8 billion.
This buyout is subject to at least 50.01% of MCC shareholder approval and other customary conditions and approvals.
Peabody is targeting production volumes of 35 million to 40 million tons from its Australian platform by 2014 to 2015, up sharply from 27 million tons produced in 2010. In 2010, Peabody’s Australian coal mining operation accounted for 12% of its worldwide mining sales, up from 2009 and 2008 levels of 10%.
This strategic acquisition is going to benefit both Peabody and ArcelorMittal. The finalization of the offer will allow Peabody to further strengthen its position in the global coal producing market. Likewise, it will allow ArcelorMittal, the world's largest steelmaking company, to have access to Macarthur's massive reserves of pulverized coal, a key ingredient in the making of steel, following the consummation of the deal.
ArcelorMittal is the world's leading integrated steel and mining company, with operations in more than 60 countries. Its crude steel production in 2010 of 90.6 million tons represented approximately 8% of the total world steel output.
Peabody Energy currently retains a Zacks #3 Rank which translates into a short-term Hold rating. The company primarily competes with the likes of Arch Coal Inc. (ACI) and CONSOL Energy Inc. (CNX)
St. Louis, Missouribased Peabody Energy is the world’s largest private sector coal mining company and a global leader in clean coal solutions. The company owns majority interests in 28 mines in the U.S. and Australia.
ARCH COAL INC (ACI): Free Stock Analysis Report
PEABODY ENERGY (BTU): Free Stock Analysis Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment