South32’s proposed $US200 million acquisition of Peabody Energy’s Metropolitan Colliery in New South Wales has been scrapped due to competition concerns.
The Australian Competition and Consumer Commission (ACCC) raised concerns about the proposed acquisition, which also included a stake in an associated coal port, in February.
According to the ACCC, the acquisition had the potential to “substantially lessen competition in the supply of metallurgical coal to Australia steelmakers.”
In abandoning the deal, South32 stated it “has always maintained that metallurgical coal is a globally traded commodity. Given this, South32 is not prepared to make significant concessions in favour of Australian steelmakers that would likely be required to mitigate the competition concerns.
“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.”
South32 agreed to buy the Metropolitan site, along with a 16.67 per cent stake in the Port Kembla coal terminal, in November last year.
The deal would have seen South32 become the Illawarra region’s only supplier of large volumes of coking coal in the medium term, following the expected closure of Glencore’s Tahmoor mine, the ACCC reported in February.
South32 chief executive officer Graham Kerr added: “Our approach to acquisitions is always opportunistic and seen through the lens of creating value for our shareholders.
“To proceed with the acquisition, in light of the anticipated concessions, would have compromised the merits of the transaction and this is not something that we are prepared to do.”
Metropolitan, which is around 30km north of Wollongong, produced two million tonnes of saleable coal in 2015.