Peabody Energy $3 billion takeover bid for Australia’s Macarthur Coal rebuffed

Peabody offer for Australia’s Macarthur shot down

ST. LOUIS — Shares of U.S. coal miner Peabody Energy Corp. edged up Wednesday a day after its $3 billion takeover bid for Australia’s Macarthur Coal Ltd. was rebuffed as too low.

By acquiring Macarthur — among the world’s biggest exporters of pulverized coal for making steel — Peabody would broaden its presence in Australia — a country rich in coal used in the resurgent steelmaking industry and in demand by key Asian markets such as China. Peabody has eight mines in Australia now.

Peabody on Wednesday did not return messages left by The Associated Press about its nonbinding bid, which analysts expect Peabody to sweeten.

Macarthur said its board of directors believed the Peabody offer undervalued the company and was not in the best interests of shareholders as Macarthur pushes its own takeover bid for smaller rival Gloucester Coal Ltd. — a move that would create a company worth about $3 billion. Peabody said its offer is conditional on Macarthur’s push for Gloucester

IG Markets research analyst Ben Potter thinks Peabody will raise its offer. “Peabody’s highly conditional, low-ball offer looks opportunistic,” Potter said.

Big acquisitions in the coal mining sector have been common lately, often centering on coking coal that’s a raw material for certain steel mills.

Peabody, which produces enough coal to fuel 10 percent of all U.S. electricity generation and 2 percent of worldwide electricity, said in January it is targeting total sales of 240 million tons to 260 million tons, up from 243.6 million tons in 2009. Peabody said Macarthur controls 145 million tons of reserves and 1.3 billion tons of resources, with current production capacity of more than 5 million tons per year and growth potential from mines in development.

Peabody said then that Asian demand was rebounding and it expects to almost double capital expenditures to $650 million this year to expand production. “The economic growth is returning to pre-recession levels in the Asia-Pacific markets led by China,” Peabody’s president, Richard Navarre, told analysts in January, noting that China’s power demand grew 21 percent over last year’s final three months alone.

Shares of Peabody rose 10 cents to $45.77 in early afternoon trading.