Who offered what for Anglo American’s Aussie coal mines

Peabody Energy’s Wambo Mine, near Warkworth in northwest NSW.

The US-listed Peabody Energy may have won the competition to buy Anglo American’s Australian steel making coal mines with its offer of up to $US3.8bn ($5.8bn), but it was not the top bidder when it came to price.

Apparently, the China-backed Yancoal put more money on the table to buy the Queensland mines – considered among the best for steel making coal in the world – and Stanmore Coal was also not too far away.

All the offers were relatively similar, but Yancoal paid slightly more, according to sources.

But in the end, without yet gaining approval from the Foreign Investment Review Board or potentially even official sign off from the Chinese government, that was considered a risk too big to take for the Anglo American deal team, and it opted for certainty in Peabody Energy.

The New York-listed miner that is based in St Louis but has a big coal mining presence in Australia, was understood to have put in place a bridging loan to finance the acquisition.

It means that Peabody will need to refinance in the coming months for the deal, instigated to help Anglo American improve its share price to keep Australian suitor BHP at bay after its $74bn attempted scrip buyout six months ago.

While the three final bidders had a similar headline price, they all had different weightings.

Peabody’s agreed cash consideration of up to $US3.8bn comprised of a payment of $US2.05bn at completion and a deferred cash consideration of $US725m, plus the potential for up to $US550m in a price-linked earn-out and a contingent cash consideration of $US450m linked to the reopening of the Grosvenor mine, temporarily closed after a fire.

Before final bids were due on November 13, suitors were told that an additional round had been added to the auction and, in that final phase which kept the market in suspense over the outcome, Anglo American’s advisers at Goldman Sachs and Morgan Stanley guided each suitor towards how they could improve their offer.

Now the attention turns to the sale for the $US3bn-plus Kestrel coal mine up for sale by EMR Capital, although it is not considered the same quality as the Anglo American portfolio.

But expectations are that Stanmore Coal, which is 64 per cent owned by Indonesia’s Golden Energy Resources, would be well placed, while Yancoal would almost certainly compete and Whitehaven may return to the deal-making scene after picking up BHP’s Blackwater and Daunia coal mines in Queensland in a $6.4bn transaction last year.

That process will start in earnest early next year through advisers Bank of America and Macquarie Capital, providing advisers working on the latest process some time to catch their breaths over the Christmas break.

The play for Peabody Energy is to reweight its portfolio more towards metallurgical coal from thermal coal, and its investors on Monday sold off the New York-listed stock on the back of its purchase.

Meanwhile, Anglo American’s share price gained just slightly – up 1.4 per cent.

An interesting development could be if BUMA, which purchased Anglo American’s Dawson mine for $US455m, buys out the 49 per cent shareholder Mitsui.

Anglo American’s Australian metallurgical coal mines in Queensland are considered to be some of the best in the world, with the jewels being Moranbah North and Grosvenor.

The price paid is beyond the expectations of analysts, who expected that the portfolio was worth at least $US3bn following the Grosvenor incident.