Are we about to see another contested bid for an Australian resource company, this time involving the world’s leading company in steel instead of another resources giant?
For a while yesterday, it seemed we were, but then things fell apart and there’s only one possible bidder for Macarthur, at the moment.
We have already witnessed the epic stoush between BHP Billiton and Rio Tinto, and have seen the battle for Mount Isa Mines five years ago that was won by Xstrata, as well as battles for several smaller coal and iron ore and metals groups.
Chinese buyers, including some end users have become involved, directly, or indirectly, while we have also seen a major Chinese metal company in Chinalco active in Rio shares (with Alcoa).
But on the whole, bids involving major world class end users are rare: they prefer small equity stakes in mines (such as the holdings Japanese companies have in some Australian projects) or to work through proxies, like trading companies (such as Mitsubishi’s 50% stake in the BHP Queensland coal group, BMA).
But it would seem that we had a possible contest bid for Macarthur Coal, the Queensland based coal group that has become the world leader in producing pulverised coal for so-called PCI feed to blast furnaces.
Macarthur is also notable for a couple of other reasons: major shareholder and founder, Ken Talbot is a seller it would seem, after being exiled from the company after being charged with corruption by the Queensland police. He has 24% of MCC, which would be valued at around $880 million. He has sold some of his stake to the new suitor.
And Macarthur is perhaps the best example of a company that has positioned itself in part of the resources market at the right time, with the right product, but been unable to full exploit that good business judgment by the infrastructure inadequacies of the Queensland Government and private enterprise in the export part of the coal chain: from the mine to the port and customer overseas.
Chinese group, Citic has a 19.9% stake in Macarthur, which three weeks ago revealed an approach from an unknown group about a possible takeover. That was tipped to be Xstrata, but there was no clarification. And despite strong suggestions that Mr Talbot might sell, he’s held on to his shares, although there were claims Tuesday night that he could be a seller at $20.
Which is the price that Macquarie put a line of shares through the market Tuesday afternoon after trading: it was a parcel of around 22 million and these seem to have been picked up by the big steel group, the world’s largest steel company, Acc ArcelorMittal.
It said yesterday it has amassed a 14.9% stake in Macarthur Coal after picking up 10.4% of MCC from Brisbane businessman Nathan Tinkler (who will have a lot more money to indulge his foray into thoroughbred horse owning and breeding). Mittal picked the rest of its stake from Mr Talbot. At 14.8% Mittal doesn’t have to go through FIRB for clearance.
The question now is: will ArcelorMittal’s move on Macarthur’s force a bid from Xstrata Coal?
The answer late yesterday was ‘no’ with Macarthur telling the market that discussions with the third party were over. The Anglo-Indian-European steel giant is now in the box seat, it would seem.
Mr Tinkler had been looking to offload his stake to help pay for his growing stable of racehorses, and is understood to have suggested to Xstrata that it buy his stake. For whatever reason, that didn’t happen.
Macarthur told the ASX yesterday that its board would enter discussions with ArcelorMittal ”in respect of a potential transaction”.
"Macarthur Coal refers to its announcements of 21 April 2008 and 5 May 2008 that Macarthur Coal had received an approach from a third party in relation to a potential transaction, and that discussions were continuing. The third party referred to in those earlier announcements is not ArcelorMittal. While the discussions with the third party have been continuing, there can be no certainty that this will continue or that any proposal will be made to the Board or to shareholders by that third party.
"ArcelorMittal has approached Macarthur Coal in respect of a potential transaction. ArcelorMittal will be pursuing discussions with the Board and Management of Macarthur Coal and Macarthur Coal will update the market if there are any further developments resulting from these discussions.
"The Board of Macarthur Coal will continue to monitor these matters and update shareholders of significant developments. The Board continues to advise shareholders that they should have no regard to media speculation or any other uninformed comment."
The approach came on the same day as a profit update from MCC which was in effect more confirmation that the terrible infrastructure snarls in the Queensland rail and ports had cost the company dearly. The wet weather in Central Queensland earlier this year hasn’t helped either
"The Board of Directors of Macarthur Coal Limited (ASX: MCC) has today announced profit guidance for the 2008 financial year. Based on current forecasts, net profit after tax (NPAT) for the year ended 30 June 2008 is likely to be in the range of $67 million to $75 million (AFY07 NPAT $66.5 million).
"Sales volumes and therefore profits for the year have been heavily impacted by constraints in the Goonyella coal chain and high levels of demurrage. Profitability in the June 2008 quarter has improved given recent coal price settlements with higher JFY08 coal prices commencing from 1 April 2008. Price outcomes have been affected by the significant volume of undelivered contract tonnage from the JFY07 contract year.
"Macarthur Coal’s CEO and Managing Director, Nicole Hollows, said; "Operati
