Macarthur shares slide on deal collapse

SYDNEY - Macarthur Coal, the world's largest pulverised coal producer, rejected Peabody Energy's revised A$3.8 billion ($4.7 billion) cash bid, saying it was too low. Its shares plunged the most in 17 months.

"The Macarthur board has met today and considered Peabody's further proposal and formed the view that based on the price and the conditions of the proposal, it cannot reasonably be recommended to shareholders," the Brisbane-based company said yesterday.

Peabody, the largest US coal producer, this month cut its takeover bid to A$15 a share from A$16 a share, after studying Macarthur's finances and the Australian Government's proposed tax on resource project profits.

Macarthur's shares plunged yesterday in Sydney trading, the most since December 2008.

Shares closed down A$2.10 to A$11.25, down 15.7 per cent.

The reaction of Macarthur's two largest shareholders, Citic Group and ArcelorMittal, also meant Peabody's offer was unlikely to proceed, Macarthur said.

"Citic believes that the long-term strategic value of Macarthur Coal exceeds by a significant margin the cash offer price contained," Macarthur said.

Citic, an investment company backed by China's cabinet, hold 22.4 per cent of Macarthur. ArcelorMittal, the world's biggest steelmaker, holds 16.6 per cent, and South Korea's Posco owns 8.3 per cent, Bloomberg data shows.

Both ArcelorMittal and Posco paid A$20 a share for stakes in Macarthur in June 2008.

- BLOOMBERG