Macarthur Coal?s US suitor Peabody Energy is certainly confident of snaring its target and it?s a point that the company?s president Rick Navarre has been quick to drive home to the market. Some of this confidence is not misplaced, given that Peabody has teamed up with a major Macarthur shareholder in Arcelor Mittal and can count on the Indian steelmaker?s 16 per cent stake in the target. That makes the finishing mark of 50 per cent acceptances an achievable one for Peabody, provided everything goes well during the due diligence process. However, it might be a bit too early to discount the possibility of counter-bidders coming out of the woodwork. That view was further emboldened yesterday after another major Macarthur shareholder, Citic Group ? one that may have a significant bearing on the end result ? told Reuters that it was weighing up all of its options before responding to the situation. Presumably one of those options could be a counterbid, possibly in tandem with a cashed-up party. Just who this might be is anybody?s guess but the likes of Rio Tinto, Xstrata and commodities firm Noble Group could all fit the bill. According to The Australian, the most likely contender for the moment is Xstrata, which had a look last year, and would have a good idea of what?s on offer here. Rio Tinto is reportedly not keen just yet, while Chinese and Indian parties could also enter the fray. We should get a clearer picture of the playing field by the end of next week once Peabody and Arcelor complete their due diligence. _________________________________
PEABODY Energy president Rick Navarre has been busy telling Wall Street analysts and investors how confident he is of his $4.73 billion joint bid with ArcelorMittal for Macarthur Coal, but the idea of a rival bidder spoiling the party refuses to die.
The shares have crept up to the $15.50 floor price set before the addition of the 16c-a-share dividend, and whispers suggest that Xstrata is the most likely rival bidder right now.
Xstrata took a look at the company last year but didn't end up making an offer. At the time, hedge funds believed Macquarie was acting for the mining giant, but Xstrata denied any formal mandate. As Macquarie continues to seek a formal role in the deal, it's also worth noting that Xstrata has worked with Deutsche Bank over the years.
Rio Tinto is thought to be a less likely suitor at this stage, as is China's Yanzhou Coal, which simply cannot move fast, judging by the 13 months it took to conduct due diligence on Whitehaven before deciding not to submit a bid.
With Navarre confirming due diligence should wrap up by the end of next week, Xstrata or other rival bidders are expected to wait to see where the formal offer from Peabody and ArcelorMittal lands before making their move.
MCC Price at posting:
$15.50 Sentiment: None Disclosure: Held
