UPDATE 3-Peabody pares bid for Australia’s Macarthur Coal

* New offer at A$15 a share, down 6 pct after mining tax

* Offer still tops rival New Hope bid

* Macarthur shares down 2 pct, trading 11 pct below offer

* Too much uncertainty from tax impact – fund managers

* Xstrata suspends copper exploration work in Queensland
(Adds fund managers’ comment, CITIC Resources no comment)

By Sonali Paul

MELBOURNE, May 10 (BestGrowthStock) – The impact of a proposed tax
on mining firms in Australia hit home on Monday as Peabody
Energy (BTU.N: ) cut its takeover bid for Macarthur Coal (MCC.AX: )
and Xstrata (XTA.L: ) suspended copper exploration work in
Queensland, both citing the tax.

U.S. miner Peabody trimmed its bid for Macarthur — its
fourth attempt to gain control of the company’s cheaper,
cleaner pulverised coal that steelmakers want — by 6 percent
to $3.4 billion after Canberra last week unveiled a planned 40
percent tax on mining profits, and Peabody’s review of
Macarthur’s books.

The tax has led several miners to put Australian projects
on hold until they have a clearer picture of how it would be

The final shape of the tax is under negotiation and the
impact could be less harsh than the market has factored in, so
investors doubted Macarthur would consider the reduced bid as
fair, sending Macarthur’s shares down 1.8 percent in a firmer
market (.AXJO: ).

“Of course, it’s likely Macarthur will turn down the offer.
The management would feel they lose face because the offer was
cut,” said Duncan Chang, who manages a $125 million global
resources fund for Prudential Financial in Taiwan, which owns
Macarthur shares.

“Also, Macarthur can bet the big hike in mining tax will
not become law and won’t get implemented in 2012,” he said.


For FACTBOX on pulverised coal: [ID:nSGE638013]

For NEWSMAKER on Macarthur CEO: [ID:nSGE63607A]

For story on political impact of tax: [ID:nSGE64900Y]

For Graphic on China coal imports:


For Graphic on forecast Australian coal exports:



Macarthur urged shareholders to take no action on the new
offer at A$15 a share, A$1 less than Peabody’s sweetened bid
last month, but still above a spurned cash and shares offer
from rival bidder New Hope Corp (NHC.AX: ), worth $3.3 billion.

Macarthur shares initially opened higher but then fell 2
percent to A$13.42, trading 11 percent below Peabody’s offer,
suggesting investors don’t expect a deal to go through.

“The definitive proposal delivers a clear, compelling and
significant premium for Macarthur shareholders, and follows
Peabody’s due diligence as well as the introduction of the
Australian resources profit tax proposal,” Peabody said.

Citing confidentiality, Peabody spokeswoman Jennifer
Morgans declined to comment on what came up in due diligence
that led it to cut its bid or whether the resources super
profits tax had been a bigger factor.


Prudential Financial’s Chang said even with uncertainty
over the mining tax, A$15 a share was an attractive offer.

It is not yet clear when Macarthur’s board will meet to
discuss the reduced offer, Macarthur spokeswoman Genevieve
Fraser said. The company has not had any shareholder feedback
yet on the new offer, she said.

Peabody reiterated it would allow Macarthur’s top three
shareholders — China’s CITIC Resources (1205.HK: ) and steel
giants ArcelorMittal (ISPA.AS: ) and South Korea’s POSCO
(005490.KS: ) — to retain their interests in Macarthur if they
wanted to.

CITIC Resources, with 22.4 percent, needs to back the bid
for it to succeed as the deal, called a scheme of arrangement,
needs 75 percent support from votes cast.

CITIC Resources declined to comment on the latest offer.

“There’s still some doubt as to whether the offer’s going
to be successful,” said Neil Boyd-Clark, portfolio manager at
Fortis Investment Partners.

POSCO said on Monday it still plans to retain its stake.

ArcelorMittal said last month it would be willing to
consider Peabody’s offer.

Macarthur’s shares tumbled 12 percent last week after the
Australian government unveiled plans to slap a resources super
profits tax on mining firms.

Investing Advice

(Additional reporting by Faith Hung in TAIPEI, Kim Yeon-hee in
SEOUL and Sui-Lee Wee in HONG KONG; Editing by Balazs Koranyi
and Ian Geoghegan))

UPDATE 3-Peabody pares bid for Australia’s Macarthur Coal