UPDATE: Macarthur Coal: Noble Cancels Middlemount Share Sale

Plans for Hong Kong-based commodities trader Noble Group Ltd. (N21.SG) to sell its stake in the Queensland state-based Middlemount coal mine to its joint venture partner Macarthur Coal Ltd. (MCC.AU) have been terminated with immediate effect, the Australian miner said Tuesday.

The Middlemount deal was tied to a plan for Noble to sell its 87% stake in New South Wales-based coal miner Gloucester Coal Ltd. (GLC.AU) to Macarthur, in exchange for a 24% stake in Macarthur. Noble's shareholders on Monday rejected that bid.

Nevertheless, Macarthur said it will seek to continue discussions with Noble and Gloucester to "assess potential alternative transactions that may be strategically valuable to Macarthur shareholders."

Macarthur is itself the target of a A$4.07 billion offer by Peabody Energy Corp. (BTU), and said on Friday it had entered talks with the U.S. company after two of its three largest shareholders signalled qualified support for the takeover.

Steelmakers POSCO (005490.SE) and ArcelorMittal (MT) have both signalled their support for the Peabody offer, although Citic Resources Holdings (1205.HK) said on Monday that it didn't yet have enough information.

Peabody has made its offer for Macarthur conditional on the Australian company dropping its bid for the Middlemount and Gloucester assets.

Noble, despite sharing Peabody's opposition to the Middlemount and Gloucester deals, is also opposed to the U.S. company's proposal to take over Macarthur.

In a statement on Monday, the company said: "We are getting sick of sitting around as a patient backstop to allow Macarthur to be shopped to the world. We feel like the patient suitor driving the prom queen to all her other dates."

The cancellation of the Middlemount deal was all but a formality after Noble's vote against the Gloucester bid, a spokesman for Macarthur said on Monday.

"The Middlemount transactions will not proceed in their current form," Macarthur said in a statement.

In an earlier statement following a board meeting in response to Noble's rejection of the Gloucester deal, Macarthur said it was "considering the consequences" of the vote against the Gloucester bid.

"Macarthur's expectation is that given the result of the meeting, it is now unlikely that the Gloucester/Noble transactions will proceed in their current form," it said.

The decision leaves a door open for Macarthur and Noble to restart discussions under different terms.

Australia is the world's biggest exporter of coal, and the port of Newcastle through which most of Gloucester's production is exported is the world's busiest coal export harbor.

Media reports have suggested that Xstrata PLC (XTA.LN) was interested in a takeover of Macarthur but Macarthur's board said it had "not received any proposal from Xstrata or its representatives."

-By David Fickling, Dow Jones Newswires; 612-8272-4689; [e-mail]