$250m wiped off Macarthur bid as uncertainty clouds decision

After conducting due diligence on the target, Peabody yesterday revised its bid to $15 a share, from $16, saying the proposed tax on mining "super profits" was a key concern.

Last month Macarthur shares had soared as high as $16.68 after three successive bids from Peabody, one from New Hope Corporation and an approach from Xstrata.

But a takeover by Peabody now looks increasingly unlikely. Not only is the deal clouded by growing uncertainty from the tax, the lower offer also puts Macarthur's board in a difficult position.

The chairman of Macarthur Coal, Keith De Lacy, said there was "no doubt" in his mind that the tax had prompted Peabody to cut its bid.

"It's a very difficult time to effect a takeover transaction because the company making the bid has to take account of the resource super profit tax ... but we are not prepared to sell our company at a discount on the basis of a tax which, judging by the reaction, may never be introduced," Mr De Lacy said.

The takeover requires the support of Macarthur's three biggest shareholders - ArcelorMittal, Posco and Citic - but none had backed even Peabody's $16 offer.

In a sign of growing scepticism that the deal will go ahead, Macarthur shares fell 2 per cent in a rising market, to $13.38.

Macarthur's board is in discussions with Peabody and has advised shareholders to take no action.

For investors, the lack of concrete information about the tax further complicates a decision about whether to sell the company.

A fund manager at Pengana Capital, Tim Schroeders, said shareholders were "flying blind"until the company provided more information on the impact of the tax.

An analyst at Patersons Securities, Andrew Harrington, said Macarthur's advice for shareholders to take no action would make it tough to recommend the revised proposal.

"With a lower bid on the table it's a bit awkward for the board to be rejecting $16 a share and $15 a share," he said.

"I don't know many company takeovers where the bidder has raised its bid twice and then come back and lowered it."