Peabody's Move Down Under
November 22, 2011
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RELATED TICKERS: BTU
After seeing that Peabody Energy had issued debt to make an acquisition, I decided to dig a little deeper into the deal and generally liked what I found.
Peabody is buying Australian coal miner Macarthur for $5 billion. Mac is the leading producer of Low Volatility Pulverized Coal Injection coal - PCI allows steel makers to use less expensive coal and less of it in the coking process. Macarthur's big markets are Korea, Taiwan, Japan, China and Brazil.
Peabody already has extensive ops in Australia and this buy expands the business and exposure to Asian economies.
The buy had a bit of drama and an interesting cast. China's Citic Resources was Macarthur's largest shareholder and sold in to the deal. ArecelorMittal was a partner in the buy, but backed out leaving Peabody to go it alone. Korean steelmaker POSCO owns a slice of Mac and did not tender its shares - it will be required to sell since over 90% of shares were tendered.
Peabody trades at value multiples and I think this deal is an overall positive. I don't have a position in BTU, but did give it a green thumb based on the research for this article.
Am I headed for a big helping of red points on this CAPS pick or do you think it'll come up green?
Fool on!
Russ
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