Newmont halts $425 million deal with Peabody Holdings

Denver-based Newmont, which holds a 49.97% stake in Peabody, originally announced a plan to recapitalize the United States’ biggest coal producing company via a special $425-million dividend.

The money was scheduled to be used to reduce Newmont’s debt load which stood at $1.2 billion at the beginning of 1989.

But the potential impact of the U.S. administration’s acid rain proposals and a coal strike that started in June, left Newmont with the impression that it was better to cancel the plan temporarily rather than leave Peabody without any cash.

The originally proposed transaction would have yielded a $425-million pre-tax dividend from Peabody to Newmont together with a $75- million payment to Newmont from Peabody investors, while allowing Newmont to retain its current stake in Peabody.

Holders of the remaining 50.03% Peabody stake had agreed to give up their entire interest in a redemption by Peabody. Those shareholders included Eastern Enterprises Ltd., Boeing Co. of Seattle, Vechtel Investments, and Equitable Life Assurance Society of the United States.

“The strike that began in June in Pittston and spread to much of the rest of the coal industry, and the potential impact on the entire coal industry of the Administration’s newly proposed acid rain legislation, have made the redemption price under the option from our co-shareholders in Peabody potentially uneconomic to Peabody,” said Chairman Gordon Parker.

New York-based companies Salomon Inc. and Shearson Lehman Hutton Holdings Inc., would have replaced the four companies listed above as shareholders under the proposed recapitalization.

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