macarthur still hoping for rival to peam bid , page-8

http://www.miningweekly.com/article/citic-weighs-options-for-macarthur-after-anglo-counterbid-collapses---sources-2011-09-08

SYDNEY ? China's Citic Group is weighing up its options as it seeks a higher offer price from Peabody Energy for its stake in Macarthur Coal following the collapse of advanced talks to launch a counterbid for the Australian miner, sources said Thursday.

Citic, which holds a 24.5% stake in Macarthur with subsidiary Citic Resources Holdings , was exploring ways to facilitate a higher bid by Peabody and bid partner ArcelorMittal , one of the sources said.

Macarthur last month accepted a sweetened $5.2-billion bid from Peabody and Arcelor after failing to find a rival bidder as it had hoped.

Citic and a 50-strong team from Anglo American had been in advanced talks on a possible counterbid but the proposal was rejected at the board level by the UK-listed miner, one of the sources said.

Citic, Macarthur's biggest shareholder, is holding out for around A$18 per share for its stake, well above the existing Peabody offer of A$16, this source said.

"There are a few different options. Citic is still looking for a higher offer which could be achieved," said the source, who could not be identified because they were not authorised to speak to the media.

A Citic spokesman declined to comment, while an Anglo spokeswoman said the company does not comment on "market speculation".

Macarthur caved in at an offer well below what it pressed for earlier in August, after fending off four takeover attempts in three years and opening its books to other potential suitors. Macarthur shares closed one cent lower at A$15.96 on Thursday.

The Peabody-Arcelor consortium needs 50.1% of shareholders to accept and already holds 16.1% of Macarthur, meaning it could still win control without Citic's blessing.

However, analysts said Citic could still use its stake as a bargaining chip because Peabody would not want to be stuck with Citic as a major shareholder.

Ultimately, the best outcome for Citic, essentially a financial investor, would be to convince Peabody to raise its offer, two sources said.

Analysts said it could also try and negotiate other alternatives, such as swapping its share in the company for stakes in mining operations.

Bidding alone or finding another partner now looks unlikely, sources said, although one noted there were other parties in the data room looking at Macarthur.

South Korean steel maker POSCO, Macarthur's third-largest shareholder with a 7.25% stake, has also stayed quiet about its intentions.

Anglo American was seen as the most likely rival bidder for Macarthur. While the miner has indicated it wanted to expand in metallurgical coal, the company is known as a notorious window shopper when it comes to buying assets.

Australia's Macquarie Bank and Orion Capital are advising Citic. JPMorgan is advising Macarthur, while UBS and Bank of America Merrill Lynch are advising Peabody. RBC Capital Markets is advising Arcelor.