US energy company Peabody Energy and European steel giant ArcelorMittal have made a direct appeal to Macarthur Coal’s shareholders to accept their hostile all-cash $4.7 billion bid after the target’s board rejected it on Monday.
However, the rejected suitors could face an uphill battle convincing Macarthur’s powerful shareholders to agree to the takeover offer, analysts say.
The Queensland-based coal producer’s share registry includes China’s state-owned Citic Australia (24.5 per cent) and South Korea’s Posco, (seven per cent), the world’s third-largest steel maker.
ArcelorMittal has a 16.1 per cent stake in Macarthur and in a joint bid with Peabody, is seeking an interest of at least 50.01 per cent.
Citic and Posco bought into Macarthur to secure control of their supplies of pulverised coal injection (PCI) coal – as had ArcelorMittal – and would be reluctant to give it up, said Mine Life senior resources analyst Gavin Wendt.
PCI coal is used in steel making and Macarthur is the world’s largest suppliers of high-quality PCI, which is which is in tight supply amid high demand.
“You’ve got a number of heavy hitters on the register, with sizeable stakes,” Mr Wendt told AAP.
“When they came on Macarthur’s register they were dismayed at the fact that coal prices were rising so strongly.
“You’ve got some seriously big players to deal with.
“I don’t know how you resolve it and it’s unlikely any potential suitor is going to put a compelling price on the table that is going to satisfy incumbent shareholders.”
Peabody Energy and ArcelorMittal released a statement saying the all-cash offer of $15.50 a share ($15.66 inclusive of a final dividend) represented a 45 per cent premium to the one-month volume weighted average price before the bid was made three weeks ago.
The suitors and Macarthur have been unable to agree on conditions for a sweetened $16 a share bid, with the target accusing ArcelorMittal and Peabody of imposing unreasonable restrictions.
This includes restrictions on Macarthur’s ability to talk to third parties that might offer a superior proposal.
“The … offer appears to be an opportunistic attempt to acquire Macarthur at a time of global economic volatility and regulatory uncertainty in Australia,” Macarthur chairman Keith DeLacy said in a statement on Monday.
He said the bid failed to reflect Macarthur’s industry-leading position.
The suitors rejected Macarthur’s conditions after analysing its operations.
The conditions included raising the bid to $18 per share if Peabody and ArcelorMittal gained 90 per cent of Macarthur, and the payment of a special dividend of up to 98 cents per share.
Macarthur shares closed up 28 cents, or 1.8 per cent, at $15.83.
