Arcelormittal, the world's biggest steel maker, has taken a 14.9 per cent stake in Macarthur Coal and is seeking talks with the company about a potential deal in a move on the miner that looks designed to lock in access to Macarthur's coal for its steel mills.
Macarthur said today that ArcelorMittal was behind two large trades at $20 a share that have delivered the steel maker a significant stake in the miner.
"ArcelorMittal has approached Macarthur Coal in respect of a potential transaction," Macarthur said in a statement. The move is the latest in a steady stream of foreign takeovers for Australian miners, sparked by surging commodity prices.
Speculation about a takeover for Macarthur has been running hot since the miner revealed in April that it had been approached by a third party about a possible transaction. Macarthur said today that this party was not ArcelorMittal and that, while talks have been continuing, there is no certainty that a proposal will be made to the board.
Under Australian takeover law, a bidder for a company has to at least match the price it has paid for a stake in its target in any subsequent bid, meaning any offer from ArcelorMittal will have to be pitched at $20 or above.
One investment banker said a $20-a-share bid for Macarthur looked fully priced given the miner's infrastructure constraints and it was hard to see another bidder matching it.
Sources suggest that the price paid by ArcelorMittal for its stake looked to have knocked the third party – believed to be Xstrata - out of the running and an agreed bid from the steel making giant was now likely soon.
However, Morgan Stanley analyst Craig Campbell said the tight coking coal market and Macarthur's changing profile meant a buyer could see value at more than $20 a share.
"Anyone that has got an interest in coking coal would have to have a look," he said. "When these opportunities arise you get one shot at it and that is it, the assets don't come around that often."
Macarthur produces pulverised coal used in steel making and ArcelorMittal is already a large buyer of output from its Queensland mines, and looks to be acting to lock in supply in a tight market.
One of the biggest issues for any bidder for Macarthur will be convincing the major shareholders on its register to sell into the bid.
ArcelorMittal looks to have already taken some steps on this front, buying its initial stake from two of Macarthur's major shareholders, according to people familiar with the situation.
However, a bigger challenge for bidders may be China's Citic Group, which has a 17.6 per cent stake.
Source: The Australian
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