Excel shares top takeover price

SYDNEY - Shares in Excel Coal, Australia's third-biggest coal-mining company by market value, climbed above Peabody Energy's A$1.83 billion ($2.24 billion) cash offer as investors called for a higher bid.

Peabody, America's largest US coal producer, offered A$8.50 a share for Excel, 1.2 per cent above Wednesday's closing price.

Yesterday, stock in Excel, the board of which agreed to the takeover, rose 4.1 per cent to A$8.74.

"It's outrageous that the directors have accepted the offer," said Don Hamson, who helps manage A$3.8 billion at State Street Global Advisors in Sydney. "There will be a lot of unhappy shareholders."

Peabody is targeting a company which is expected to increase its output almost fourfold by 2008 from last year as demand from Asian steelmakers and power plants drives prices higher.

Shareholders, who will vote on the offer in early October, may push for a higher premium to reflect the potential of new projects including the Millennium, Wambo and Wilpinjong mines. Spot prices of coal burned in power plants have soared 45 per cent since November.

Excel's market value has jumped about fivefold since it went public in May, 2004.

Stocks of rival coal producers also climbed. Centennial Coal was up 8.4 per cent, Macarthur Coal 5 per cent and Gloucester Coal 5.4 per cent.

Peabody's offer "does capture the value of our existing assets including most if not all of the development projects," Excel managing director Tony Haggarty said yesterday.

The recent narrowing in the premium "perhaps just reflects the fact that we've been trading very strongly."

Excel Coal yesterday gave a preliminary net income forecast of about A$120 million for the year ending next June, 25 per cent below the mean estimate of 10 analysts surveyed by Thomson Financial. It repeated the forecast for this year of A$95 million to A$100 million.

- BLOOMBERG