At $5 billion, the largest coal takeover in Australia, which followed the introduction of the Gillard government’s carbon tax, has sent a positive signal to overseas investors. According to Freehills partner Tony Damian, who led the Freehills team that acted for Peabody Energy on the bid, “It’s a blueprint for those with a congested share register.” Damian made the comment following Peabody Energy’s successful recommended bid for Macarthur Coal, with Peabody Energy now moving to full ownership of Macarthur Coal. Prime Minister Gillard has pointed to the acquisition as an example of the coal industry thriving despite the imminent carbon tax, a message which seems to be reaching the industry following the successful takeover.

Damian also pointed out that Peabody, a U.S. –based energy company; secured 100 percent ownership of Macarthur Coal on its own. Originally, the bid was a joint one with steelmaker ArcelorMittal, which exercised its option to tender its shares into the bid. According to him it is worth remembering that there are other jurisdictions besides China and Asia that are interested in Australia’s coal industry. “In-bound investment last year came more from the U.S. than from China; Canada was also very active,” he concluded.

Peabody has said that it will look to complete operational improvements and advance Macarthur’s growth pipeline, which it will be able to do having secured 100 percent ownership. In particular, the deal means that others in the industry will understand that there are other ways of proceeding besides either having to lock in a joint bid partner or going alone: “People probably thought in more binary terms before the bid was successful ‘either you’re with us or you’re not, and if you’re not we can’t proceed with the bid’,” noted Damian. “Now, people might look to utilising a little more optionality in their arrangements.”

The end result of the acquisition means that Peabody will be able to use its expertise in developing assets held by Macarthur. Peabody also acquired Excel Coal for A$2 billion and has demonstrated its expertise through developing other assets following that acquisition.