Opposition from a major shareholder has sunk the revised bid for Macarthur Coal from US giant, Peabody Energy Corporation.
And in the wake of the announcement, the market gave Macarthur Coal shares a real bashing yesterday after it rejected the lowered $15 a share suggested takeover offer from Peabody.
Peabody last week reduced its bid to $15 per share, valuing the company at $3.81 billion, having earlier offered $16 per share, or $4.07 billion.
Peabody blamed the proposed resource rent tax for cutting $1 a share off its offer, or around $250 million.
That didn’t sit well with directors of Macarthur who yesterday gave it the thumbs down.
"The Macarthur board has met today and considered Peabody’s further proposal and formed the view that based on the price and the conditions of the proposal, that it cannot reasonably be recommended to shareholders," Macarthur said in a statement yesterday.
Macarthur shares dropped by more than 15%, or $2.10, to $11.25. They hit a low of $11.23 in trading.
Macarthur said its decision considered feedback from its two largest shareholders, China’s CITIC and the world’s largest steelmaker, ArcelorMittal.
"CITIC does not find the (Peabody further proposal) attractive," CITIC said in Macarthur’s statement.
"CITIC believes that the long-term strategic value of Macarthur Coal exceeds by a significant margin the cash offer price contained in (Peabody’s further proposal)."
Peabody was willing to provide any or all of Macarthur’s three major shareholders, including Korea’s Posco, the opportunity to retain their economic interest in a privatised Macarthur.
"The terms of the shareholders agreement to govern a privatised Macarthur Coal will be critical in any assessment by CITIC," CITIC said in comments quoted in the Macarthur statement.
"The proposed terms of a shareholder agreement tabled by Peabody in March 2010 are not acceptable to CITIC."
Interestingly, Macarthur didn’t use any quotes from Arcelor about its view of the lowered Peabody offer.
Macarthur said its board thought there was no basis for further talks with Peabody about its current proposal.
And in an announcement on Monday, Macarthur and CITIC said they had agreed to extend the date by which the coal miner must hold a shareholder meeting to approve a transaction between the parties.
Macarthur in December said it intended to acquire all of CITIC’s direct interests in certain Macarthur operating assets, as well as end CITIC’s marketing rights over coal produced at those projects.
Macarthur, in return, agreed to issue 11.3 million of its shares at $9.70 per share for a total $110 million.
The extraordinary general meeting of shareholders was to be held by June 30, but the new deadline is September 30.
The transaction also is subject to approval by CITIC shareholders and its board, and a waiver by minority participants in the Coppabella and Moorvale joint venture of certain pre-emptive rights.
In the absence of a renewed interest from Peabody, Macarthur can still hold a meeting by the end of next month and do the deal with CITIC, which will lift its stake in the Brisbane-based coal group to well over 23%.
Peabody quit the battle yesterday, saying “Peabody looks forward to advancing its internal growth projects and continuing to pursue other value-added investments to serve high demand markets”.
New Hope still has its cash and share offer out there, but presumably the CITIC opposition applies to them?
