Battle royal for Macarthur Coal shaping up

The battle for Macarthur Coal is poised to intensify after news that Anglo American is considering a challenge to Peabody and ArcelorMittal’s $4.7 billion hostile bid. Anglos, the world’s fifth most valuable miner, is studying Macarthur’s finances, media reported at the weekend.

Anglos has been restructuring aggressively under chief executive Cynthia Carroll (pictured) and with second quarter 2011 profits of $4 billion has the necessary cash. But a rumoured joint bid with China’s Citic could turn out to be the decisive factor to beat Peabody and ArcelorMittal’s offer as Citic has already built up a 24% stake in Macarthur.

Miners are scrambling for coal assets and coal for power-generation has averaged about $130/tonne this year from less than $100 in 2010. Coal now accounts for 30% of global energy use, the highest since 1970.

The Herald Sun reports the would-be acquirers are bidding $15.50 a share, but the target’s directors are demanding at least $18. Macarthur shares closed 18 lower to $15.32 on Friday, amid heavy selling on the ASX 200 index of Australia’s biggest companies.

The Telegraph reports Anglo itself has been an acquisition target and has undergone a radical restructuring in recent years, selling off non-core businesses such as cement production and phosphate mining.

The Australian reports Citic is Macarthur’s biggest shareholder, with a 24% stake, meaning its alignment with a rival bidder to Peabody and Arcelor, which have a 16 per cent stake, would be a big hurdle for the existing bid.

The Sydney Morning Herald quotes Peter Davey, the head of metals and mining research at Standard Bank in London: “They [Anglos] have the firepower because they were a bit stingy on dividends. Maybe they kept the money for this instance potentially.”