THE stage has been set for a legal battle between US coal major Peabody and Anglo American after Peabody terminated its purchase agreement to buy Anglo’s steel-making coal assets in Australia.
Peabody cited a material adverse change (MAC) in the deal which was the fire at the Moranbah North mine five months ago. The mine remains closed following that event.
In reply, Anglo has rejected Peabody’s claim that a MAC had occurred while CEO Duncan Wanblad said the group will institute an action claiming damages for wrongful termination and that Anglo was confident in its legal position.
Wanblad also indicated Anglo did not believe it would have a problem finding another buyer “for value in due course.”
At stake would appear to be a $2bn up-front cash payment by Peabody made after the group agreed to the deal in November last year for $3.8bn in cash.
In addition to the upfront payment Peabody agreed to a deferred payment of $725m with the balance consisting of a $550m price-linked earnout and a contingent cash consideration of $450m linked to the re-opening of the Grosvenor coal mine.
Peabody also agreed to pay a $75m deposit on signing which Anglo American was entitled to keep if the sale was terminated in certain limited circumstances
Peabody president and CEO Jim Crech commented “the two companies did not reach a revised agreement to cure the MAC that compensated Peabody for the material and long-term impacts of the MAC on the most significant mine in the planned acquisition.”
The acquisition had been scheduled to close in April 2025. According to Grech, “Anglo estimates $45m per month of holding costs at Moranbah North. The mine was previously targeted to produce 5.3 million tons of saleable production in 2025, yet there is no timetable for the resumption of longwall mining at forecasted volumes and costs.”
That is rejected by Wanblad who stated, “the event at Moranbah North does not constitute a MAC under the sale agreement with Peabody.
“Our view is supported by the lack of damage to the mine and equipment as well as the substantial progress made with the regulator, our employees and the unions, and other stakeholders as part of the regulatory process towards a safe restart of the mine.”
Wanblad commented, “we are therefore very disappointed that Peabody has decided not to complete the transaction. We believe it would have been better for all parties to avoid a legal dispute.
“On that basis we have invested significant effort and shown great flexibility over recent months to find a solution for Peabody including proposing amended terms and technical options.
“We continue to reserve our rights under the definitive agreements, we are confident in our legal position and will shortly initiate an arbitration to seek damages for wrongful termination.”
Wanblad added, “we are confident that we will successfully conclude an alternative sales process for value in due course.
