ST. LOUIS (AP) -- The deal for Peabody Energy, the world's biggest private-sector coal company, and a partner to buy Australia's Macarthur Coal for more than $5 billion concludes more than a year of pursuit and continues widespread consolidation in that energy sector.
Macarthur, a major producer of pulverized coal coveted by steel producers, said Monday that it is recommending its shareholders accept a revised bid of $16 per share -- a 44 percent premium over the stock's $11.8 close on July 11 before it was made -- from St. Louis-based Peabody and Luxembourg's ArcelorMittal, the world's largest steelmaker.
ArcelorMittal already is Macarthur's second-biggest shareholder, with a 16 percent stake.
Twice spurned by Macarthur over the past year and a half, Peabody believes the sweetened deal would bolster Peabody's growing Australia operations, which already produce much of the coal sent to customers in the Asia-Pacific region -- notably China and India -- and which have been a key revenue driver for Peabody.
Macarthur would be swallowed up by a new holding company owned 60 percent by Peabody and the rest by ArcelorMittal.
While calling the deal "slightly on the expensive side," Brean Murray, Carret & Co. analyst Jeremy Sussman wrote in a research note Tuesday that "this likely transaction makes a lot of strategic sense for Peabody." The combination would give the U.S. company "precious" Australian terminal space while making Peabody a bigger player in producing the coal used in steelmaking.
Sussman affirmed his "buy" rating on Peabody stock and his target price of $81 apiece.
"We believe there is a very likely chance that this deal goes through as is," Sussman wrote.
Macarthur said Monday that a better bid still could arise, but there was no certainty one would.
The offer from Peabody and ArcelorMittal includes a "no-talk" limitation, meaning Macarthur is banned from talking to other potential buyers.
The deal comes on the heels of Alpha Natural Resources Inc.'s purchase of struggling Massey Energy Co. in a $7.1 billion buy announced in June. Alpha, the nation's fourth-largest coal producer by revenue, said then that the acquisition will offer greater access to international markets.
Peabody, undertaking what it has called its biggest expansion in its 128-year history, considers the deal for Macarthur -- with roughly 270 million tons of coal reserves -- "a major step," Peabody chairman and CEO Gregory Boyce said.
Aditya Mittal, ArcelorMittal's chief financial officer, urged Macarthur shareholders to accept the joint offer.
Peabody, which fuels roughly one-tenth of all U.S. electricity generation and more than 2 percent worldwide, also has signed an agreement to develop a huge Chinese surface mine expected to produce 50 million tons of coal a year for decades.
Sussman, in his research note, said such ventures should "help Peabody further cement its status as the bellwether of the coal space."
Peabody shares rose 4 cents to close at $48.63 on Tuesday and climbed another 8 cents after hours.