St. Louis, Mo.-based coal producer Peabody Energy (BTU-N) has agreed to a cash deal to take over Australian coal producer Excel Coal (EXOAF-O, EXL-A) for about US$1.5 billion.
The offer is for A$8.50 per share, or US$6.21, making US$1.34 billion in cash; Peabody will also assume US$190 million in Excel debt. Excel’s board, which has recommended the offer to shareholders, plans to hold a vote in October; 75% of shares must be voted in favour of the offer for it to succeed, but management already controls 47%.
A sweetener is a 6-month dividend for the period ending June 30, representing about 50% of Excel’s earnings for that half year.
Excel operates three mines in New South Wales, in Australia, and has a large coking-coal development project, Millennium, near existing mines held by Peabody’s Peabody Pacific subsidiary in Queensland. In all, it has about 500 million tonnes in metallurgical and thermal coal reserves, putting Peabody’s acquisition cost near US$3 per tonne.
Millennium is scheduled to start production later in 2006, with another development project in New South Wales, the Wilpinjong open pit, to start production of steam coal near year-end.
In 2005, Excel produced 5.6 million tonnes of coal, and at year-end (Excel’s fiscal half-year) the company had turned a net profit of A$24.5 million (US$18.3 million) on revenue of A$171 million (US$128 million). In its third quarter, which ended March 31, Excel produced 1.46 million tonnes of saleable coal.
Excel said in a statement that its predicted earnings of A$100 million (US$74.8 million) for fiscal 2006 (ended June 30 of this year) was still on track. It expects A$120 million (US$89.8 million) in 2007.
Its steam coal operation, Wambo, west of Newcastle, New South Wales, mainly produces for export at long-term fixed-price contracts. Two other mines in the state, North Wambo and Metropolitan, produce coking coal both for export and for domestic sale.
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