MELBOURNE (Reuters) ? Peabody Energy (BTU.N) and ArcelorMittal (ISPA.AS) look set to succeed with their $5 billion takeover offer for Macarthur Coal (MCC.AX), investors bet on Tuesday, as they drove the target's shares up 37 percent.
Shares in Macarthur soared to just below the offer price of A$15.50 a share, indicating investors do not expect a bidding war for the world's biggest producer of pulverized coal, in contrast to the three-way battle for Macarthur last year led by Peabody.
Peabody then ran into resistance from Macarthur's three key shareholders -- ArcelorMittal, Korea's POSCO (005490.KS) and China's Citic (1205.HK) -- with its bid of up to A$16 a share.
This time Peabody has locked in top global steel maker ArcelorMittal and lowered the acceptance threshold to 50 percent from 75 percent, making it possible to go ahead with the takeover without the support of POSCO and top shareholder Citic, which owns 24 percent.
"The cost of mining has been rising sharply and mining resource is running low, so industry leaders such as Peabody and ArceloMittal need to expand their access," Ariel Hsiao, manager of the Gold and Mining Fund of HSBC Global Asset Management in Taiwan.
"China, the world's biggest buyer of commodities, has been trying to acquire mining companies to help cut costs. That would not be something that companies including Peabody would like to see so, they are doing it before China succeeds in its attempt," said Hsiao, who recently sold her holdings in Peabody.
The coal sector environment is also quite different from a year ago. Since Peabody walked away last year, the Australian government unveiled plans for new mining and emissions taxes that will cut into mining profits while the coal sector is still struggling to get back on its feet after devastating floods earlier this year in Queensland, the center of Australia's coal production and home to Macarthur's mines.
POSCO, which holds a 7.25 percent stake, has declined to comment on the offer, while Citic Australia said it was studying the offer.
FULL VALUATIONS Macarthur's shares jumped to A$15.20 after the proposed bid of A$15.50 a share was announced. The offer will be reduced by the amount Macarthur pays in its final dividend in August.
At A$15.50 a share, the offer is worth 19 times forecast earnings for 2012.
"We view these multiples as full for the producing asset base and do not rate an overbid highly," Citi analysts said in a note.
The PCI coal that Macarthur produces is prized by steel makers as a cheaper and cleaner coal for use in coke ovens at steel mills.
Last year, Peabody outbid New Hope Corp (NHC.AX) before walking away from its offer due to Australia's then-proposed resources super profits tax.
New Hope is unlikely to enter a bidding war for Macarthur, as it has just acquired Northern Energy (NEC.AX) and is focused on its development pipeline, a person with direct knowledge said on Tuesday.
Other coal miner stocks rose on hopes they might be the next targets, with Gloucester Coal (GCL.AX) up 4.4 percent, New Hope up 2.5 percent, and Whitehaven Coal (WHC.AX) and explorer Aston Resources (AZT.AX) up 2 percent, against a 1.8 percent drop in the broader market (.AXJO).
Whitehaven, currently worth A$3 billion, failed to secure a buyer following a five-month auction earlier this year, with its managing director partly blaming the impact of the strong Aussie dollar.
Macarthur shares are not widely held by institutions in Australia, who see the coal stocks as overpriced, particularly relative to other resources stocks.
Coking coal producers in particular have soared due to strong demand from steel makers in China and India and a lack of major new resources being developed.
"From our perspective, all of those (coal) stocks are relatively expensive, relatively unattractive," said Ben Lyons, an analyst at ATI Asset Management, which does not own shares in Macarthur.
(Editing by Balazs Koranyi and Lincoln Feast)
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