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Anglo American eyes Macarthur coal

August 23, 2011

“Anglo American is considering a counterbid for Macarthur Coal in an attempt to gatecrash a A$4.7bn (US$4.9bn) bid for the Australian coal group from Peabody Energy and ArcelorMittal. Earlier this month, Macarthur said it was open to offers that valued its business at nearly A$5bn after formally rejecting an ‘opportunistic’ bid from Peabody Energy of the US and steelmaker ArcelorMittal.
People familiar with the bid process said there were a number of interested parties, one of which was Anglo American. The mining group is said to be working with its traditional advisers, which include Goldman Sachs.
It is not clear whether Anglo will proceed with any offer, and talks are expected to come to a head in the next week. A deal would be the largest by Anglo since 2007, with its recent blooming profits creating a degree of financial flexibility that the company has not enjoyed for several years.”

Source: Financial Times, August 21 2011

Observations:

  • Peabody and ArcelorMittal have made an offer to the shareholders of Macarthur after Macarthur’s board declined to agree to the offer and not search for higher bidders.
  • Anglo’s metallurgical coal operations are currently mainly located in Queensland, giving a good geographical match with Macarthur’s operations.

Implications:

  • The current stake of ArcelorMittal in Macarthur will be an important hinderance for other parties to make a counterbid. If their bid would succeed, they would still be left with ArcelorMittal as an important party in the board room.
  • Potential other parties interested in buying Macarthur could be Chinese steel makers and/or coal miners, other large coal producers in Australia (Rio Tinto, BMA), government backed Indian coal miners, or even Vallar/Bumi. Based on the proximity to existing operations Anglo would be able to justify a higher premium than new entrants in the Queensland coal industry.

©2011 | Wilfred Visser | thebusinessofmining.com

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