Peabody cuts takeover bid for Macarthur Coal to $3.4 billion due to proposed Australian tax

Peabody cuts Macarthur Coal bid to $3.4 billion

MELBOURNE, Australia — U.S. coal giant Peabody Energy Corp. reduced its offer for miner Macarthur Coal Ltd. to 3.8 billion Australian dollars ($3.4 billion) due in part to a proposed new Australian tax on mining profits, the companies said Monday.

Peabody, one of the world’s largest coal suppliers, had last month offered $3.8 billion after Macarthur, a major producer of pulverized coal used by steelmakers, had rebuffed two earlier Peabody offers as inadequate.

The U.S. company, based in St. Louis, Missouri, said in a statement its revised offer from AU$16 a share to AU$15 still offered a 31 percent premium on McArthur’s average share price over the month of March

“The definitive proposal delivers a clear, compelling and significant premium for Macarthur shareholders, and follows Peabody’s due diligence as well as the introduction of the Australian resources profit tax proposal,” Peabody said.

The government angered the mining industry last month by announcing a new 40 percent tax on the booming profits of resource companies from 2012.

The government expects to raise an additional AU$9 billion a year through the tax while opponents warn it would deter investment in the mining industry.

Macarthur said in a statement that its board of directors will meet to consider the offer. It did not say when that meeting would take place.

Since Peabody made its AU$16 a share offer on April 15, Macarthur’s share price has fallen from AU$15.28 to Friday’s closing price of AU$13.69.

That drop reflected the government tax plans plus a broader market downturn in response to the Greek debt crisis.

Peabody made an original bid at AU$13 per Macarthur share, which was increased to AU$14 and later to AU$16.

Andrew Harrington, analyst with Australian stockbroking firm Patersons Securities, said it was highly unusual for a bidder to reduce its highest offer.

Shareholders and analysts would now be curious about what Peabody found in its due diligence that caused it to lower its takeover bid, he said.

Peabody last month announced its first-quarter profit through March fell 21 percent to $133.7 million, reflecting lower coal prices and higher provisions for taxes.