It seemed inevitable, despite the decision by the suitors to go "hostile" and approach shareholders direct, but in the end Peabody Energy and ArcelorMittal sweetened their offer for Macarthur Coal to $4.9 billion, and won the green light yesterday.
Peabody and ArcelorMittal raised their offer for the world’s biggest producer of pulverized coal by 3% or 50c a share to $16 a share.
The latest bid includes a 16c a share dividend for a total offer value of $16.16 and as a result Macarthur directors folded and recommended the joint offer.
Macarthur, which has fended off four takeover attempts over the past three years, bowed to the higher offer after a rival bid failed to emerge, despite a number of unknown rivals looking at its books. One of those was said to be Anglo American in concert with Macarthur’s biggest shareholder, Citic of China.
"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," Macarthur said in yesterday’s statement which saw the shares rise to $15.86, well under the offer price as punters concluded that there would not be a counter-bid.
Peabody, the largest coal company in the US, and ArcelorMittal , the world’s top steelmaker, went hostile at the start of the month after failing to secure an agreed deal with Macarthur’s board.
The board representative for Macarthur’s largest shareholder, Citic Resources, was not part of the latest resolution, Macarthur said yesterday after allowing its representative a leave of absence on August 1.
Citic owns 24.5% of Macarthur and won’t be a stumbling block in the new offer as the bidders have a minimum acceptance condition in the offer of 50.1%.
Citic has marketing rights for some of Macarthur’s coal products.
Macarthur is the world’s biggest producer of coal for the pulverised coal injection process.
Under the new agreement, Macarthur must cease any talks with other potential bidders and close down a data room currently open to potential suitors. The deal includes a break fee of $48.3 million.
Macarthur said in yesterday’s statement: "Macarthur shareholders on the register on the record date of 2 September 2011 will also be entitled to receive the final dividend in respect of FY2011 of A$0.16 per share with no reduction in the A$16.00 per share offer price. This fully franked dividend will be paid on 9 September 2011."
Macarthur was due to release its target statement to the original hostile bid on Thursday.
Comment:
But have Macarthur directors, while agreeing to the new offer, established a price for a rival suitor to top?
Anglo American has talked the talk about diversifying out of South Africa and into Australia, now’s the chance for a major deal that will do that.
Shareholders have a definite price they know they will get if a rival bidder doesn’t emerge.
It’s probably on the cheap side given the blows to the company in the past year from rain, floods, storms and rail problems. Surely those woes won’t occur again in the next year?
If they don’t and even if prices fall, Macarthur’s higher production and sales will ensure an increase in sales and profits.
But those benefits will flow to the new owners, whoever they might be.
