3rd UPDATE: ArcelorMittal Backs Out Of Macarthur Deal
25 Ottobre 2011 - 9:10PM
Dow Jones News
ArcelorMittal (MT, MT.AE), the world's largest steelmaker, said
Tuesday in a surprise announcement that it has decided to back out
of its joint purchase of Australia's coal mining company Macarthur
Coal Ltd. (MCC.AU).
"ArcelorMittal has determined that it would no longer be
appropriate to allocate substantial capital to the acquisition of a
non-controlling, minority business interest," the company said in a
statement.
"Given the unanticipated level of acceptances into the offer,
ArcelorMittal believes that it is more appropriate to focus its
capital elsewhere in its business," ArcelorMittal added.
ArcelorMittal backed out of the deal after some of Macarthur's
large shareholders such as Citic Group tendered their shares into
the offer, thereby making ArcelorMittal responsible for a larger
cash payment than it was willing to spend for a minority stake in
the coal mining company, a person familiar with the matter
said.
Credit Suisse said in a note that ArcelorMittal may have
initially entered the deal because it saw a good opportunity to
increase its say in Macarthur by spending as little as US$200
million. The company, however, lost interest when the potential
cash outlay grew to as much as US$1.2 billion following Citic's
decision to accept the A$16-a-share offer, which valued Macarthur's
equity at A$4.8 billion (US$5 billion).
Chinese state-owned investment company Citic Group is the
largest shareholder in Macarthur with a 25.2% stake.
In July, ArcelorMittal and the world's largest private-sector
coal company, U.S.-based Peabody Energy Corp. (BTU), launched a
joint takeover of the world's biggest producer of pulverized coking
coal, a low-cost raw material used to make steel, through their
PEAMCoal Pty Ltd. joint venture.
PEAMCoal sought to gain a 50.01% control of Macarthur shares and
ended up with a near-60% stake in the company as of Monday
following Citic's decision to accept the offer
ArcelorMittal, which owned 16.1% of Macarthur prior to the bid
and holds a 40% stake in the joint venture, said it is now
tendering all of its Macarthur shares to PEAMCoal, noting that the
decision to sell out of the deal was in accordance with the rights
originally embedded in an agreement with Peabody.
It said PEAMCoal's plan to increase its offer to A$16.25 a
share, or A$4.9 billion, would stay in place if the joint venture
is able to secure 90% of Macarthur by Nov. 11. That would allow the
joint venture to move to compulsory acquisition of the remaining
shares under Australian takeover law.
Credit Suisse said ArcelorMittal's decision was a "sensible
move," while Peabody Chief Executive Greg Boyce said the decision
was "good news for Peabody."
ArcelorMittal will remain a shareholder in PEAMCoal until the
termination arrangements have been concluded in about 90 days'
time. It will also continue to fund the deal in accordance to the
terms of the joint venture.
Meanwhile, Peabody said it will fully fund the entire
acquisition with cash and debt and expects the deal to be earnings
accretive within a year.
-By Alex MacDonald and Matt Day, Dow Jones Newswires; 44 20 7842
9328; alex.macdonald@dowjones.com
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