Peabody Energy, the US coal group, has cut the value of its Macarthur Coal takeover bid to A$3.8bn (US$3.4bn) just a week after Canberra announced plans to impose a 40 per cent tax on profits generated by Australian mining groups.
The revision from a previous offer of A$4.1bn, which came after Peabody examined Macarthur’s financial records, indicates that Canberra’s tax proposal could stymie mergers and acquisitions in the country’s booming mining sector.
However, Peabody would not disclose precisely why it had revised its bid for Macarthur, which has been lowered from A$16 to A$15 a share, compared with its opening offer in March of A$13 a share.
The tax proposals, which are yet to be passed into law, also threatens new investment in Australia’s resources sector, with both BHP Billiton and Rio Tinto indicating fresh mining investments could be in doubt over uncertainty due to the new tax.
Xstrata, the Anglo-Swiss miner, said on Monday its Queensland copper unit had suspended its regional exploration programme in response to Canberra’s tax.
The exploration programme, in conjunction with junior mining companies, involved planned expenditure of “around A$30m over the next three years”, Xstrata said.
Peabody said its revised cash offer remained compelling and was pitched at a “significant premium” to Macarthur’s share price before its takeover interest became known in March.
However, Macarthur told its shareholders to take no action ahead of a board meeting to “consider and assess the merits of Peabody’s” latest offer.
Shares in the Australian group dropped 2 per cent to A$13.38 as analysts speculated that Peabody’s lower bid, which is conditional on a recommendation from its target’s board, would fail.
Macarthur Coal is the world’s biggest supplier of pulverised coal and has been at the centre of a contested bid battle after earlier agreeing to a trio of deals with Noble Group, the Hong Kong based commodities trader.
Noble last month walked away from its assets-for-shares proposal, which would have given the Hong Kong group close to 25 per cent of Macarthur’s shares.
Macarthur has also rejected a shares and cash bid from Australian rival New Hope that at the time was worth A$14.50 a share.
Peabody is still attempting to woo Macarthur’s three biggest shareholders, China’s Citic and steelmakers ArcelorMittal and Posco. The US group has offered all three shareholders the opportunity to retain their economic interest in Macarthur if its bid succeeds in removing Macarthur from the Australian stock market.
Macarthur last month said that Xstrata had approached its leading shareholders and appointed advisers. However, a bid from the Anglo-Swiss miner has not materialised.
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