Peabody (BTU.US) to buy Anglo American's coal mines for nearly $3.8 billion, targeting global steel market
1min read Peabody Energy (BTU.US) is shifting its focus to the growth in the global steel market as demand for coal in the US weakens, agreeing to buy four coal mines in Australia from Anglo American (NGLOY.US) for $3.78bn, which will help the St Louis-based company nearly triple its metallurgical coal production in two years and put it on track to become the world's third-largest exporter.
"This is a major change. This transaction will redefine Peabody," said Mark Spurbeck, Peabody's chief financial officer, on Monday.
Peabody's shares fell as much as 6.6 per cent on Monday, the biggest intraday decline since Aug. 5.
Peabody is a major supplier of power plant coal, but has been seeking to change its structure as utilities have reduced coal burning in recent years. Steel production is also a major source of greenhouse gas emissions, but it is essential for most large infrastructure projects and is expected to see demand rise.
With Anglo American, Peabody expects about 74 per cent of its revenue to come from metallurgical coal exports, up from the current 50 per cent, Mr Spurbeck said.
Also noteworthy is that the mines Peabody is buying are in Australia, close to the fast-growing Asian economies. The company expects the deal to be completed by mid-2025 and to generate immediate earnings.
Andy Blumenfeld, head of Opis analytics, said the deal comes as there are signs of a rebound in Chinese steel production, and Peabody could ship metallurgical coal “anywhere” in Asia. India, Japan and emerging economies in south-east Asia will all be desperate for metallurgical coal.
"They need steel. It's critical for any economy," Mr Blumenfeld said.