Macarthur Coal board has told shareholders to accept the takeover bid by ArcelorMittal and Peabody Energy (PEAMCoal), but has again hinted that a better alternative bid might happen.

Macarthur released its target's statement yesterday and backed last week's announcement that it had accepted the improved, $16 a share, $4.83 billion joint takeover offer.

The sweetened offer of $16 per share compares to a bid of $15.50 per share in July, rejected by Macarthur as being too low.

It remains possible that a higher bid could emerge, with other interested parties such as Anglo American (perhaps in partnership with Citic of China, Macarthur's biggest shareholder) reported to have done due diligence since the initial offer was made.

"As previously advised, Macarthur has pursued discussions with third parties which have expressed interest in putting forward a superior proposal for your Macarthur Shares.

"Your Directors advise that as at the time this Target's Statement was finalised, no superior proposal had been received.

"Although it remains possible that a superior proposal might be made, none has emerged to date and there can be no assurances that any will emerge," the directors said in yesterday's lengthy statement.

Directors also warned shareholders that if the offer is unsuccessful, and no alternative offer emerges, then Macarthur's share price will trade below the offer price.

Europe's ArcelorMittal, the world's largest steelmaker, has a 16% shareholding and as part of PEAMCoal has a 50.01% minimum acceptance condition.

Peabody Energy is the biggest coal miner in the US (and perhaps the 5th biggest miner in Australia).

Directors admitted that the current market conditions were against rebuffing the offer.

"Significantly, since the date of the Initial Announcement, the S&P/ ASX 300 Resources Index has fallen 9% to 2 September 2011 in a volatile and uncertain trading environment.

"It is your Directors' understanding that a significant proportion of Shareholders on the register representing the free float are likely to have a short-term focus and therefore are more likely to sell their Macarthur Shares.

"Accordingly, this may also potentially adversely impact the performance of Macarthur Shares following the close of the PEAMCoal Offer."

But interestingly, on Page 2 of its statement, Macarthur replied quite strongly to a number of claims used by Peabody and Arcelor in their offer document.

The bidders claimed that Macarthur management had not delivered on key targets such as earnings, growth and production which regularly fell short, while an acquisition had failed.

Macarthur blamed the global financial crisis and severe weather, including record high flooding in Queensland for closing mines and hitting targets. (All things which hit Peabody's operations here, and impacted them in the US in 2008 and Australia as well. Likewise Arcelor made a loss in at least one quarter during the GFC.)

The replies were effective and believable, but it seems the management knows the company's free float is dominated by hedge funds and others looking for a quick profit and will therefore sell, so resistance is futile.

Key shareholders Citic (24.5%) and Posco (7%) have yet to reveal their attitudes to the bid. It can still succeed without their approval, but seeing Posco is a major customer and Citic is well connected to them in China, it would be handy to future sales and relationships to have both on board in some way.

PEAMCoal's offer's closing date was extended to September 27 yesterday.

Macarthur shares finished up 4c at $15.99 in yesterday's big 2.4% panic sell-off in the wider market.

Copyright Australasian Investment Review.
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