Anglo set to launch offer for Macarthur

 
Kasmira Jefford
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ANGLO AMERICAN, the world’s fourth largest mining company, is preparing to trump Peabody Energy and ArcelorMittal’s joint $4.7bn (£2.85bn) bid for Australian coalminer Macarthur, a move that would mark Anglo’s first acquisition in three years.

The battle for Macarthur, which produces pulverised injection coal used in steelmaking, is the latest in a string of deals in the mining sector, fuelled by China and India’s growing hunger for base metals.

Macarthur would be Anglo American’s biggest buy under the leadership of Cynthia Carroll, who took the reins in 2007. It would also be the company’s first big Australian acquisition since it bought the coking coal assets of Royal Dutch Shell in 2000.

A bid would pit the London-based mining giant against two of its sector rivals, Peabody Energy, the world’s biggest coal producer and ArcelorMittal, the biggest producer of steel, who clubbed together to put in an offer for Macarthur last month, valuing the company at A$4.7bn (£2.9bn).

On Thursday last week, the two firms took their offer straight to Macarthur’s shareholders after the board rejected their proposal.

Macarthur said it was still open to talks with rival bidders and told shareholders to take no action on what it earlier called an “opportunistic” offer until it sent out its formal response in the next two weeks.

It is understood that Anglo could launch a bid with Citic Resources, China’s investment arm and Macarthurs biggest shareholder, with a 24 per cent stake, which would present another obstacle to the current bid. Arcelor and Peabody together own 16.1 per cent and need another 34 per cent of shareholders on board for the offer to be accepted.

Citic’s representative on Macarthur’s board took a leave of absence at the beginning of August to avoid any “future actual or potential” conflict of interest, fuelling speculation it would play a part in a rival bid.

ANALYSIS: THE MINING SECTOR’S KEY PLAYERS ARE VYING FOR CONTROL OF AUSTRALIA’S LARGEST COAL MINER
Anglo American
A bid by Anglo American would mark the mining giant’s biggest acquisition since Cynthia Carroll took over as chief executive four years ago. The deal would give Anglo steel-making coal mines in Australia as prices trade at record-highs. Anglo, which is part owner of the world's biggest platinum and diamond producers including De Beers, has cut thousands of jobs and sold off unwanted businesses to reduce its debt, including the partial demerger of Tarmac, the British aggregates company.

Peabody Energy
Peabody Energy, led by chairman and chief executive Gregory H Boyce, tried to buy Macarthur in early 2010 but the offer was rejected by Macarthur’s shareholders. The US -based group had reduced its offer of A$16 after the centre-left Labor government considered imposing a tax on coal and iron-ore miners. By joining forces with Arcelor and starting from its 16 per cent stake, Peabody has more chance of winning another 34 per cent of shareholder approval needed to take control.

Arcelor Mittal
Arcelor Mittal, led by Lakshmi Mittal, one of Britain’s richest men, owns a 16 per cent stake in Macarthur Coal. Arcelor’s steel business – the largest in the world – is centred mainly in Europe and North America, which have been slow to recover from the recession compared to the key growth markets in Asia. Commodity-hungry China has driven up the price of steel, but profit margins in Europe and America have declined. Analysts say an acquisition would provide Arcelor with exposure to the East and the chance to get into pulverised coal injection and coking coal.