The $4.7 billion move on Macarthur Coal from US group Peabody Energy and the world’s biggest steelmaker ArcelorMittal is headed for a bitter, hostile battle for control of the Queensland-based miner.
That was after Macarthur revealed in a statement yesterday that talks for an agreed bid had collapsed.
As a result of that failure, Peabody and Arcelor said in a later statement that they would take their $165.50 a share offer to Macarthur shareholders, in other words, the bid has gone hostile.
And Macarthur made it clear it was seeking rival deals, meaning that if the price is right, control of the company will change hands.
Macarthur issued its statement at 9.30 am; Peabody and Arcelor’s statement came around four hours later, after the announcement of a deal on the US debt ceiling and spending cuts.
Macarthur said the two parties could not agree on conditions for a $16 a share bid, with Macarthur accusing the suitors of imposing unreasonable restrictions.
These included ‘no-talk’ limitations restricting Macarthur’s ability to talk to third parties that might offer a superior proposal to Peabody and ArcelorMittal’s.
Macarthur made clear it is talking to other parties about other proposals.
Macarthur chairman Keith DeLacy told shareholders in the statement that, "The BidCo Offer appears to be an opportunistic attempt to acquire Macarthur at a time of global economic volatility and regulatory uncertainty in Australia, and fails to reflect Macarthur’s industry leading position and the growth potential of its unique assets".
"Macarthur has a portfolio of high quality producing, development and exploration assets in the highly prospective coal basins of Queensland which are not easily replicable.
"Furthermore, with access to valuable export port capacity in an increasingly infrastructure constrained environment, Macarthur believes it is well positioned to meet its stated objective of reaching production of 9.2Mtpa by FY 2014, with significant opportunities for further growth."
"BidCo has advised that the BidCo Offer will be conditional and will require various regulatory approvals, including regulatory approvals in China, Japan and possibly other jurisdictions.
"This condition means that the BidCo Offer, when dispatched to shareholders, is likely to be open for longer than the minimum one month period."
Macarthur said it was "in continuing discussions with a number of interested parties in relation to possible alternative proposals that may result in a superior offer to Macarthur shareholders.
"As noted above, while there can be no assurance that a superior proposal will emerge, the Board is strongly of the view that it should do all that it can to facilitate this."
The Directors said they will advise shareholders on the BidCo Offer and make a recommendation in sufficient time for shareholders to make an informed decision before the close of the BidCo Offer.
The suitors also rejected Macarthur’s conditions, including the offer per share increase to $18 if they acquired more than 90%, along with an extra dividend.
"Macarthur rejected the extensive deal protection restrictions demanded by Peabody and ArcelorMittal, because, in the Directors’ views, these restricted Macarthur’s ability to facilitate access to other parties that may generate a superior alternative proposal," the company said yesterday.
Peabody and ArcelorMittal said in their statement they will proceed with their $15.50 a share offer.
Macarthur rose to a day’s high of $15.94, before the shares settled back to end at $15.83, up 28c, or 1.8%, on the day and a sign that investors still think a counter offer could arrive from a cast of parties named by the business media in recent days.
Macarthur’s highlighting of its talks with other parties helped foster the market belief that another bid might arrive (Indian, Chinese, Canadian and Australian rivals were mentioned).
The attitude of the company’s largest shareholder, CITIC, the Chinese trading group and investor, to the offer will be vital to its success or failure. CITIC owns just 22.7% of Macarthur. (Arcelor owns 16.1% and Posco, the Korean steel giant, owns around 8.3%).
Macarthur’s board yesterday granted the CITIC Group representative a three month leave of absence to remove any hint of a conflict of interest.
Media reports have claimed that CITIC is opposed to the bid.
That, plus the lack of a board recommendation could see it fall, even though there is a minimum acceptance condition of 50.01% from the two bidders.
