UPDATE 3-Macarthur Coal rebuffs Peabody; to vote on other deal

* Macarthur says A$14/share offer not attractive

* Tells shareholders to back Gloucester alternative

* Peabody says still talking to Macarthur shareholders

* Peabody to continue pursuing Macarthur ahead of April 12

* Macarthur shares down 5.2%, still above Peabody offer
(Adds Peabody comments)

By Fayen Wong

PERTH, April 7 (BestGrowthStock) – U.S. coal miner Peabody Energy
(BTU.N: ) may have to raise its bid for Macarthur Coal (MCC.AX: )
by around 10 percent after the Australian miner rejected its
latest $3.27 billion offer.

Shares in Macarthur, the world’s biggest exporter of
pulverized or PCI coal that is sought after by steelmakers,
fell more than 5 percent on Wednesday after the firm rebuffed
Peabody’s increased A$14 per share offer, but held well above
that level.

“The ball’s in their court. It’s up to Peabody as to
whether they’ll make another bid,” said Macarthur spokesman
Alasdair Jeffrey.

Peabody has to move quickly, if it is to return to the
table, as Macarthur shareholders are due to meet on Monday to
vote on an alternative plan to take over smaller rival
Gloucester Coal (GCL.AX: ) and give a one-quarter stake in
Macarthur to Gloucester’s main shareholder, Noble Group
(NOBG.SI: ).

“We continue to work with the major shareholders … and
attempt to engage the Macarthur board in what we feel is a far
superior bid to the Noble bargain basement price that is under
consideration right now,” said Vic Svec, Peabody’s head of
investor relations.

He said Peabody would continue approaching Macarthur on all
fronts ahead of Monday’s vote, but would not say whether
Peabody would make another offer before then.

“Stay tuned,” Svec said.

Peabody’s revised offer earlier this week was subject to
Macarthur confirming by Wednesday that it would defer the
Gloucester vote, otherwise its offer would lapse.

The saga is the latest in a flurry of coal deals in
Australia, which have seen the number of large independent
local coal producers dwindle as mining majors turn to
acquisitions to satisfy booming Asian demand.

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Graphic on Australian mining deals:

http://graphics.thomsonreuters.com/10/04/AU_MNDLS0410.gif

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Brisbane-based Macarthur said Peabody was not offering an
adequate premium, and it would go ahead with the Gloucester
vote.

“Peabody’s revised proposal remains highly conditional and
does not fully value Macarthur and its significant growth
prospects,” Macarthur Chairman Keith De Lacy said in a
statement.

Most analysts reckon Peabody needs to increase its offer to
A$15-A$16 per share to win support among Macarthur’s board,
though some suggested the U.S. firm may sit and wait for the
outcome of Monday’s vote on the Gloucester takeover.

“That takeover would be dilutive to current shareholders,
so it’s still not clear if it will go over the line,” said
Andrew Pedler, resource analyst at Wilson HTM brokerage.

“There’s a lot of uncertainty on what Peabody will do next,
which is why some investors have decided to take profits.”

Trading in Macarthur, which was down 5.2 percent at
A$14.31, was six times the 90-day daily average.

Peabody noted its offer is well above the top end of an
independent expert’s valuation on Macarthur, at A$12.49 a
share, that Macarthur used in February to recommend its
takeover of Gloucester to shareholders.

Macarthur, which is run by CEO Nicole Hollows, says that
expert report is now out of date, as coal prices (COAL: ) have
soared in settlements made since then.

“If they believe the value is greater (now), one would
question why they’re proceeding with the Noble transaction,”
Svec said.

Gloucester shares soared 26 percent to A$11.70, in trading
that was seven times busier than normal, after Noble said it
would buy the 12.3 percent of the group it doesn’t already own
at A$12.60 a share — if the Macarthur takeover does not go
ahead.

Gloucester’s independent directors have recommended
Macarthur’s takeover and said they would assess Noble’s offer
when they receive formal documents.

TOP SHAREHOLDERS

Macarthur needs only 50 percent shareholder support for the
Gloucester deal to go ahead.

It’s not yet clear how the miner’s top three shareholders
— China’s CITIC Resources Holdings (1205.HK: ) and steel giants
ArcelorMittal SA (ISPA.AS: ) and South Korea’s POSCO (005490.KS: )
— who own a combined 47.3 percent of the stock, will vote.

A source at POSCO told Reuters on Tuesday the steelmaker
planned on being a long-term shareholder in Macarthur and
wanted to keep its stake. [ID:nTOE63504O]

With POSCO and ArcelorMittal having paid about A$20 a share
to buy into Macarthur two years ago, it’s unlikely they would
sell at a loss, analysts noted. The two hold a combined 24.9
percent stake in Macarthur.

“Besides, the main rationale for these steelmakers to
invest in Macarthur was to make sure it doesn’t land in the
hands of a major producer,” said David Haddad, resource analyst
at RBC Capital Markets.

ArcelorMittal and POSCO both buy Macarthur’s pulverized
coal and bought into the miner in 2008 to protect their share
of output from Macarthur’s Coppabella and Moorvale mines, which
produced about 3.6 million tonnes of coal last year.

Stock Market Advice

(Additional reporting by Sonali Paul in MELBOURNE)
(Editing by Ian Geoghegan)

UPDATE 3-Macarthur Coal rebuffs Peabody; to vote on other deal