Commodity trader Noble Group Ltd. (N21.SG) said its shareholders Monday rejected a proposal to sell its unit Gloucester Coal Ltd. (GLC.AU) to Macarthur Coal Ltd. (MCC.AU), a decision that will stifle Noble's attempt to get a stake in Macarthur, which is the target of an international takeover battle.

"Noble Group wishes to announce that the merger proposal between Macarthur and Gloucester was soundly defeated by shareholders in a vote held in Hong Kong," Noble said in a statement.

Shareholders were asked to decide whether to approve the move to sell Gloucester Coal to Macarthur and the acquisition of Macarthur shares by Noble.

In December, Macarthur and Noble announced a deal, subject to shareholders' approval, under which Macarthur would acquire Gloucester Coal and Middlemount Coal Pty Ltd. Noble, meanwhile, would get a 24% stake in Macarthur.

However, the progress of the deal was complicated in March when Peabody Energy Corp. (BTU) made an unsolicited offer for Macarthur, which was initially rejected by Macarthur. The U.S. company since then has raised its offer, adding that it has the support of some of Macarthur's large shareholders.

Peabody's latest offer of A$16 cash for every Macarthur share has prompted Macarthur to postpone indefinitely a shareholder meeting to vote on its proposed takeover of Gloucester and associated transactions with Noble Group.

Posco (005490.SE), a large Macarthur shareholder, has given in-principle support for Peabody's offer, while another, ArcelorMittal (MT), has said it's worth considering.

Citic Resources Holdings Ltd. (1205.HK) which is also one of the large shareholders, has said that it won't comment on the merits of a tie-up with Peabody as it doesn't have enough information about the sweetened A$4.07 billion takeover bid for Macarthur.

A Macarthur Coal spokesman has said the company's board will meet late Monday or early Tuesday to form a view about the implications of the Noble shareholder vote.

"The board's view has always been that the Gloucester transaction makes great sense," he told Dow Jones Newswires.

Earlier in the day, Noble in a separate statement reiterated its opposition to Peabody's offer for Macarthur saying that the offer is more in favor of large shareholders than small shareholders.

"It is just wrong, in our view, that the deal being contemplated gives different options to the large shareholders of Macarthur than those given to the smaller shareholders," Noble said.

"We have said it before, and we will say it again, the Macarthur-Gloucester merger gave everyone the chance of staying in if they wanted or if not, they could have sold their shares in what would have been a larger, more liquid company."

"As for Noble, we are getting sick of sitting around as a patient backstop to allow Macarthur to be shopped to the world. We feel like the patient suitor driving the prom queen to all her other dates," it added.

Noble has already announced that it will make an all cash offer for the remaining shares of Gloucester it doesn't already own if the Gloucester sale to Macarthur doesn't materialize.

Noble, which currently owns a 87.7% stake in Gloucester, didn't immediately respond to a query on whether it would go ahead with its plan to buy rest of Gloucester.

-By P.R. Venkat, Dow Jones Newswires; +65 64154 152; venkat.pr@dowjones.com

(David Fickling and Ross Kelly in Sydney contributed to this report)
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