Australia's Macarthur Coal touts growth, bid talks

MELBOURNE (Reuters) - Australia's Macarthur Coal MCC.AX, battling a $5 billion takeover offer, played up its growth prospects on Wednesday and said it was continuing talks on potential counteroffers, nudging its shares higher.

Peabody Energy (BTU.N) and ArcelorMittal (ISPA.AS) have made a A$15.66 a share offer, including Macarthur's final dividend. Macarthur considers the offer too low and is due to respond to it by September 1.

Any white knights would have to show their hands by then.

"Macarthur notes that it is in continuing discussions with a number of interested parties in relation to possible alternative proposals that may result in a superior offer to shareholders," the company said.

Chief Executive Nicole Hollows declined to comment on the bid talks or its major shareholders' views ahead of the formal response to Peabody and ArcelorMittal's offer, except to note that top shareholder, China's Citic Group, said last week it was weighing all options.

Citic owns 24.5 percent of Macarthur, partly through its Hong Kong-listed unit Citic Resources (1205.HK).

Macarthur's shares rose 12 cents to A$15.74, just 0.5 percent above the offer value, suggesting investors doubt a higher offer will emerge.

No one doubts that Peabody is eager to grab Macarthur following its failed bids last year.

"In the absence of a third party approach, I wouldn't be surprised if they did bump up their offer to gain board approval," said Tom Sartor, an analyst at RBS in Brisbane.

With ArcelorMittal owning just over 16 percent and the bid only requiring a 50 percent support, the deal does not necessarily need support from Citic or Macarthur's other key shareholder, South Korean steel maker POSCO (005490.KS), which owns 7.25 percent.

Anglo American (AAL.L) is studying Macarthur's books for a possible counterbid, sources familiar with the matter have said. However, sources played down media reports of a possible tie-up between Anglo and Citic.

WEATHER WOES

Having fended off four takeover attempts over the past three years, Hollows said her toughest challenge right now was not the takeover distraction.

"This is our fifth takeover (offer) in three years, so I'm getting pretty used to it," Hollows told Reuters.

"The toughest challenge would be the wet weather, by far," she said.

Macarthur met forecasts for a slight increase in annual operating profit for the year to June after production was severely hampered by floods.

The company said production would increase to between 5 and 5.3 million tonnes in the year ahead, and is looking to boost it to 9.2 million tonnes a year by 2014.

"We are firmly on track with our 9.2 million tonnes by 2014 and delivering future growth beyond that," Hollows said at a briefing.

She warned that output would return to normal only in early calendar 2012 at the earliest as the company faces restrictions on discharging water from its pits, and expects its operating costs to increase by 15 percent to A$115 a tonne in the year ahead as it restores pits to normal.

The biggest risks to the company's growth outlook are delays in regulatory approvals and rail bottlenecks out of the Bowen Basin, with several competing projects ramping up at the same time, Hollows said.

Macarthur's profit before one-offs rose to A$142.4 million ($149 million) for the year to June from A$139.1 million a year earlier. That compared with analysts' forecasts of around A$144.6 million, according to Thomson Reuters I/B/E/S.

Its second-half profit was hit by a five-month disruption to coal production after heavy rains and flooding in Queensland, saved only by record prices for coal used in steel-making.

Macarthur's net profit including the selldown of its Middlemount and Codrilla stakes nearly doubled to A$241.4 million.

($1 = 0.954 Australian Dollars)

(Editing by Ed Davies and Vinu Pilakkott)