Peabody bids for AustraliaÔÇÖs Macarthur

US mining company Peabody Energy has submitted an unsolicited $3 billion bid for Australia's Macarthur Coal.  Macarthur has rejected the proposal, saying it ÔÇ£is not in the best interests of shareholders in its current formÔÇØ. However, Brisbane, Queensland-based Macarthur's shares soared 20 percent as investors bet that Peabody, the world's largest private coal firm, would raise its bid. Macarthur controls 145 million tonsÔÇöor a third of the world's supplyÔÇöof the much-coveted low-volatile PCI coal, which is prized by steelmakers as a way to both extend the life of expensive coke ovens at steel mills and reduce greenhouse gas emissions. Commenting on the offer, Keith DeLacy, chairman of Macarthur, said: ÔÇ£PeabodyÔÇÖs proposal is highly conditional and does not fully value Macarthur and its significant growth prospects.ÔÇØ De Lacy added that Macarthur still believes there are strategic and operational benefits in its planned takeover of Gloucester Coal, also based in Australia. The purchase would see Macarthur move to 100 per cent ownership of GloucesterÔÇÖs central Queensland-based Middlemount mine by purchasing the stake of Gloucester's majority owner, Noble Group. PeabodyÔÇÖs bid is also said to have failed to reflect sharp increases in coal prices over the past few months and escalating forecasts on the back of demand from steel mills and power stations in Asia. MacarthurÔÇÖs main customers have traditionally been Japanese and South Korean steel mills, but last year it also began selling to China. Peabody, which already owns nine coal operations in the Australian states of Queensland and New South Wales, produced 22.3 million tons of coking and thermal coal in 2009. To be successful in its bid, the US firm must win support from Macarthur's three major shareholders: China's CITIC Resources and steelmakers ArcelorMittal and POSCO. Together, the three companies own 47.3 percent of Macarthur. The St Louis, Missouri-based firm said that in the event of an acquisition, Macarthur would become a privatized company operated and controlled by Peabody. PeabodyÔÇÖs offer reflects the growing interest in Australia by companies seeking to tap into its rich natural resources in order to meet booming demand from China and India. Last year, Yanzhou Coal Mining paid A$3.5 billion for Felix Resources. Earlier this month, Royal Dutch Shell and PetroChina agreed to buy Arrow Energy for A$3.44 billion.