Xstrata in talks to buy Macarthur Coal

Xstrata has jumped back into the global merger frenzy. It emerged yesterday that the miner is the mystery bidder that forced Macarthur Coal, Australia’s largest independent coal producer, to announce 10 days ago that it had been approached about a possible takeover.

Macarthur and its top two shareholders, who it admitted had also been approached, have kept silent about the identity of its suitor since the announcement. Sources close to the situation said yesterday however that the two sides were in talks, though had not yet agreed a price.

Macarthur’s shares have surged in recent days, valuing it at A$3.7bn (£1.8bn) and setting up a potential windfall for its top two shareholders, founder Ken Talbot and Nathan Tinkler, who own 24 per cent and 11 per cent respectively. An Xstrata spokeswoman declined to comment.

The deal would add Macarthur’s pulverised coal injection (PCI) coal assets to Xstrata’s big coking coal and thermal coal business in Australia. It would be the latest manoeuvre by the world’s largest mining groups as they seek to bulk up to take full advantage of the commodities boom.

Doubts are growing about the world’s largest potential mining deal, BHP’s £75bn hostile bid for rival Rio Tinto. Paul Skinner, chairman of Rio Tinto, told the Australian press that the mining giant could break itself up if the offer from rival BHP Billiton fails. Rio’s shares dropped last week to a new low, nearly 7 per cent below the value implied by BHP’s all-share offer. Since BHP launched its unsolicited bid in November, Rio’s shares have traded above the price proffered by BHP. The downswing reflects concerns in the market over the 100-plus regulatory approvals needed and the high political sensitivity to the deal from customers in Asia, Europe and America.

Jane Coffey, fund manager at Royal London Asset Management, an investor in both companies, said: “We’re not confident. It should happen because it’s actually a very complementary deal and the synergies of the much larger company will make it very attractive. But that’s very different to whether it will actually happen.”

China’s state-owned aluminium group Chinalco made a dawn raid in February to take a 9 per cent stake in Rio, seen as a first step toward spoiling the deal. China is the biggest customer of both companies.

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