Peabody Energy’s Metropolitan Colliery. Image: Peabody Energy
BY CAMERON DRUMMOND
BHP Billiton spinoff South32 has scrapped its $US200 million purchase of Peabody Energy’s Metropolitan Colliery and associated port infrastructure near Wollongong, NSW.
On 23 February, the Australian Competition and Consumer Commission (ACCC) released a statement saying the proposed acquisition could substantially lessen competition in the coking coal supply to Australian steelmakers, as it would leave South32 as the only major supplier in the region.
“The ACCC considers that competition is necessary for customers in a region to obtain export price parity,” the competition monitor wrote.
“If there is a single exporter in a region, that supplier will likely set the price to local customers to match the next best option available to the customer, which will be supply from another region.”
In light of the ACCC writ, the company decided to pull out of the deal.
“South32 is not prepared to make significant concessions in favour of Australian steelmakers that would likely be required to mitigate the competition concerns,” the company said in a statement.
“To do so would be contrary to the global market in which metallurgical coal producers compete and would adversely affect the value proposition of the acquisition.”
In November last year the company had agreed to purchase the NSW Colliery and a 16.7 per cent interest in the Port Kembla coal terminal from the US coal giant.
“Our approach to acquisitions is always opportunistic and seen through the lens of creating value for our shareholders,” South32 chief executive Graham Kerr said.
“To proceed with the acquisition, in light of the anticipated concessions, would have compromised the merits of the transaction and this is not something we are prepared to do.”