Peabody lifts offer for Excel
September 20, 2006
A NORTH American coalminer lodged a higher offer for Excel Coal as expected yesterday - but it turned out to be Peabody Energy outbidding itself by $215 million to fend off a rival approach from Anglo Coal.
Peabody increased its bid to $9.50 a share - up from $8.50 a share - after securing 19.9 per cent of the company by purchasing shares from Excel directors.
Peabody publicly claimed it raised its offer to $2.04 billion to secure support from some wavering shareholders who thought the earlier bid was too low.
But it's understood the move was also in reaction to a potential rival offer from Anglo Coal, the coal arm of mining giant Anglo American.
It is believed Anglo Coal approached Excel's board with a rival proposal on Friday and Excel managing director Tony Haggarty informed Peabody its bid could be thwarted.
"It was a serious approach and one that we were obliged and felt the need to take seriously," Mr Haggarty said, although he would not confirm the name of the suitor.
He added Excel had received no other approaches since signing the friendly merger deal - including an $18 million break-free clause - with Peabody in July.
Some analysts and fund managers thought Excel's original proposal was priced too low.
"Given the lack of assets available in the market … at the moment, clearly the minority shareholders weren't going to sell at the original price," Argo Investments fund manager Chris Hall said.
British asset management firm Newton Investment Management bought shares at prices above the $8.50 offer in August and September, increasing its stake in Excel to 11 per cent, presumably in hopes a higher offer would emerge.
Excel directors, including Mr Haggarty, owned about 47 per cent of the NSW coalminer before selling a 19.9 per cent blocking stake to Peabody yesterday.
It's understood Peabody's increased offer was contingent on it grabbing the large share parcel to help provide certainty its bid would succeed.
Anglo Coal, or other companies such as Canada's Teck Cominco and the Fording coal trust could still return with a higher offer before a vote on Peabody's proposal is held.
The vote is scheduled for October 4 but may be delayed due to the changes to the scheme of arrangement announced yesterday.
But given that Peabody has obtained a blocking stake and is eager to begin an integration process with Excel, the likelihood of another offer would seem to have diminished.
Mr Haggarty declined to reveal the indicative price of Anglo Coal's offer but he said the revised Peabody proposal was "by far the best proposal that the shareholders and the board had available to them".
Excel shares closed at $1.19, or 14 per cent, higher at $9.60 yesterday, indicating some investors think a higher bid might still emerge.