Macarthur Rejects Peabody Offer

Darlington Musarurwa
07 Apr, 2010
New York City

Australian service industry contracts for the third month in March. Macarthur Coal rejects revised offer from the U.S. based Peabody Energy and holds out for A$4 billion offer. BHP Billiton resumes coal exports at a terminal in Queensland after the recent Cyclone Ului.

[R]3:00 AM New York, 7:00 PM Sydney - Australian service industry contracts for the third month in March. Macarthur Coal rejects Peabody’s revised offer and holds out for A$4 billion offer. BHP Billiton resumes coal exports at a terminal in Queensland after recent cyclone.[/R]

The Australian stock index rose marginally despite the service industry contracting for the third consecutive month, according to a private report. Smaller companies closed higher at close bucking the trend.

Commodity stocks also increased after gold prices advanced 0.2% to $1,137 per ounce and crude oil prices edged up 0.1% to $86.90 per barrel.

In Sydney trading ASX 200 Index increased 0.1% or 6.5 to 4,960.20.

Of the ASX 200 index stocks, 111 rose, 68 fell, and 21 were unchanged. Macarthur Coal led decliners in the index shares with a fall of 4.9% as the company rejected a revised A$3.6 billion takeover bid from U.S. firm Peabody Energy.

The Australian dollar fell 0.2% to 92.62 U.S. cents.

Service Activity Shrinks in March

The Australian Industry Group/Commonwealth Bank Performance of Services Index rose by 0.1 points to 48.4 in March from the previously month, contracting for the third straight month.

A reading below 50 shows contraction, while that above 50 shows expansion.

Gains in key business related sectors of property and business services, communication services and transport and storage were offset by declines in consumer-based sectors such as accommodation, cafes and restaurants and retail trade.

The report notes that business experienced further falls in sales, new orders and deliveries.

Australian Industry Group Chief Executive, Heather Ridout, said the index shows the “patchy nature” of the recovery.

“The sluggish performance of the consumer-related sub-sectors illustrates a degree of caution on the part of households, strongly influenced by interest rate increases and the anticipation of further rises,” said Ridout.

Macarthur Rejects Peabody’s Revised Offer

Macarthur Coal announced today that the company’s board has unanimously rejected the revised takeover bid from Peabody Energy as it doesn’t represent an adequate premium for control of the company.

The firm claims the revised bid is priced at a 1.5% discount to Macarthur’s average broker price target of A$14.21 per share.

Macarthur Coal at its shareholder’s meeting on April 12 it intends to issue shares to Noble Group for the takeover of 100% of Gloucester Coal.

Peabody offer is conditional and automatically lapses if Macarthur Coal shareholders approve the purchase of Gloucester Coal.

ASX Movers

Macarthur Coal Limited led decliners in the S&P ASX 200 index with a loss of 4.9% followed by losses in Perseus Mining Limited of 4.1%, in Mirabela Nickel Ltd of 3.2%, in Energy World Corporation Limited 3.0% and in Eastern Star Gas Limited 2.5%.

Sigma Pharmaceuticals Limited led gainers in the S&P ASX 200 index with a rise of 10.9% followed by gains in Macmahon Holdings Limited 9.6%, in PanAust Limited of 6.6% and in AWB Limited of 5.6%.

Other Movers

BHP Billiton plc the mining company decreased 0.2% to A$44.53 and Rio Tinto Limited rose 0.4% to A$81.01.

BHP Billiton resumed coal loading at its Hay Point terminal in Queensland after the terminal was damaged during Cyclone Ului. Hay Point terminal has 44 million tons of coal export capacity.

Caltex Australia Limited the marketing of petroleum products added 4.6% to A$11.93 and Santos Ltd the transportation and marketing of hydrocarbons dropped 0.4% to A$14.85.

Macarthur dropped 5.2% to A$14.31 and analysts projected that the bid from Peabody Energy may have to be revised to A$4 billion.