World Business

Macarthur snubs $3.4b bid

By Rebecca Keenan and Jason Scott (China Daily)
Updated: 2010-04-10 10:59

A geologist logs samples at a Macarthur coal Ltd facility in Central Queensland, Australia. [MACARTHUR COAL LTD VIA BLOOMBERG]

MELBOURNE, Australia - Macarthur Coal Ltd rejected a A$3.64 billion ($3.4 billion) takeover bid from New Hope Corp, which is battling Peabody Energy Corp and Noble Group Ltd for control of the world's biggest producer of pulverized coal.

New Hope's offer of 2.7 of its shares for every one of Macarthur's, worth A$14.31 at Friday's close, doesn't give an adequate premium for control, Macarthur said in a statement. Peabody raised its bid to A$14 a share this week. Macarthur closed at A$15.55 in Sydney, the highest since July 31, 2008.

The contest for Macarthur comes after coal prices doubled and China's imports tripled last year.

"The game has just started," said Paul Xiradis, who manages $10 billion as chief executive officer of Ausbil Dexia Ltd in Sydney. "It's obviously a prize asset and people are bidding up for it. As a shareholder, I'm pretty pleased."

Ausbil acquired its Macarthur stake last year at less than A$10 apiece, Xiradis said.

The battle has helped make it the busiest start to a year for takeover offers of Australian companies in at least a decade. More than $30 billion has been offered for Australian-based companies in announced deals so far in 2010, according to data compiled by Bloomberg, more than double the $14.1 billion in the same period last year.

New Hope declined 1 cent to A$5.30 at the close on the Australian stock exchange. Pulverized coal is primarily used to make steel.

"The steel industry globally is recovering and we are now reaching the stable levels that we saw in terms of production rates 12 to 18 months ago," Tom Price, a commodity analyst at UBS AG, said in an interview on Bloomberg Television.

Prices for steelmaking coal are rising on demand from China and as heavy rain and flooding in Australia's Queensland constrain exports.

Posco agreed to pay $167 a metric ton, or 109 percent more than previously, for semi-soft coal in a three- month supply accord with an Australian producer, UBS said on March 26. That compares with $80 a ton for the year ending March 31, and a UBS forecast of $125 a ton.

Bloomberg News