The Australian
23 December 2009

QUEENSLAND'S Macarthur Coal has made a $1.2 billion bid to expand into NSW and broaden its coal mix and port options, agreeing to buy Gloucester Coal and other assets of Hong Kong's Noble Group to create a $3.4 billion coal company.

In four separate deals, Macarthur will get four new mines in NSW, widen its PCI (pulverised) coal production base to include more coking coal and thermal coal, and reduce its dependence on Queensland's clogged coal port and rail system.

``After the transactions, Macarthur will be a bigger, stronger and more diverse business, operating six mines in three coal basins and shipping via two coal terminals,'' Macarthur chief executive Nicole Hollows said yesterday.

The deal would boost Macarthur's production from 5 million tonnes a year to about 7.5 million tonnes.

It is the second time this year that Sydney-based Gloucester has been in play. Noble beat out Whitehaven Coal's attempt to gain control of Gloucester in May by bidding $7 a share and winning an 87.7 per cent stake.

Through three deals, which are a mix of scrip and cash and not all signed off, Noble plans to sell most of its Australian mine interests for a 24 per cent stake in Macarthur -- becoming the biggest shareholder of a company that is increasingly tightly held by big overseas shareholders.

China's Citic owns 22.4 per cent of Macarthur, but will have its stake diluted to 16.5 per cent if the Noble deals go through.

Steel giants ArcelorMittal and Posco will have their Macarthur stakes diluted to about 13 per cent and 6.5 per cent respectively.

Macarthur is offering a choice of 0.84 shares or $8 cash for each Gloucester share, with the scrip offer valuing the company at $669 million, or $8.16 a share.

The scrip offer is 25 per cent higher than Gloucester's last closing price of $6.55 a share.

Noble has committed to taking the scrip offer in the absence of a higher offer and Gloucester's independent directors have recommended the remaining 12 per cent of shareholders accept the deal if there is not a better offer.

Gloucester chief executive Barry Tudor will be offered a senior executive position at Macarthur.

Macarthur has also agreed to acquire Noble's 30 per cent stake in the Middlemount joint venture in Queensland for $127m cash and $80.5m in Macarthur shares, giving the Brisbane miner full ownership of the mine and reducing royalties payable to Noble.

In a non-binding and incomplete agreement, Macarthur also said it planned to pay Noble $185.8m in cash and shares for a 79.9 per cent stake in Donaldson Coal, which has mines in the Hunter Valley.

Separately, Macarthur has agreed to issue 11.3 million shares to Citic at $9.70 a share to buy the Chinese state-owned company's 7 per cent stakes in the Coppabella and Moorvale mines and cancel marketing rights over coal sold to China and India from those mines. UBS is advising Gloucester and JPMorgan is advising Macarthur.

Macarthur assets

• Coppabella mine, Qld: 2.4 million tonnes a year. Mainly pulverised coal injection coal {73.3% stake}
• Moorvale mine, Qld: 2.2 mtpa of mainly PCI coal {73.3% stake}
• Middlemount mine, Qld: Up to 1.8 mtpa of mainly PCI coal from 2011 {70% stake}

Gloucester assets

• Duralie mine, NSW: 1 mtpa of thermal and coking coal
• Stratford mine, NSW: 800,000 tpa of thermal and coking coal