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Peabody and ArcelorMittal seek Macarthur Coal acquisition

World Coal,

Peabody Energy and ArcelorMittal SA have confirmed that they have jointly submitted an indicative proposal to the board of directors of Macarthur Coal Ltd to acquire all shares of the company.

Under the proposal by a newly formed company, owned 60% by Peabody and 40% by ArcelorMittal, Macarthur shareholders would be offered a cash price of AU$ 15.50/share through an off-market takeover offer. The new company has a relevant interest of approximately 16% in Macarthur's shares. The proposal price implies a value for the equity in Macarthur of approximately AU$ 4.7 billion and represents a substantial premium to recent trading.

The proposal to Macarthur's board is non-binding and conditional on the successful completion of due diligence, which would be completed in a timely manner. Any resulting offer to Macarthur shareholders would be subject only to minimum 50.01% acceptance, Australia's Foreign Investment Review Board approval and other customary conditions and approvals.

According to Gregory H. Boyce, chairman and CEO of Peabody, "We believe there is significant value that can be created by managing Macarthur's portfolio of coal assets using Peabody's industry-leading operating, development and commercial skills. We look forward to advancing this proposal to complete a transaction for the benefit of Macarthur shareholders."

Aditya Mittal, CFO and member of the Group Management Board of ArcelorMittal, said: "ArcelorMittal has been a long-term investor in Macarthur, and we look forward to discussing our proposal with the board of Macarthur."

Macarthur is the world's largest producer of seaborne low volatile pulverised coal injection (LV PCI) coal with production and development assets in the Bowen basin, Australia, including the Coppabella and Moorvale joint venture and Middlemount mine. It controls total coal reserves of approximately 270 million t (approximately 175 million t on an attributable basis) and total resources of approximately 2.3 billion t (approximately 1.7 billion t on an attributable basis). It has current production guidance of 3.8 – 4 million t for the year ended 30 June 2011.

Peabody is the world's largest private-sector coal company and a global leader in clean coal solutions. With 2010 sales of 246 million t and nearly US$ 7 billion in revenues, Peabody fuels 10% of US power and 2% of worldwide electricity.

ArcelorMittal is the world's leading integrated steel and mining company, with operations in more than 60 countries. In 2010, ArcelorMittal had revenues of US$ 78 billion and crude steel production of 90.6 million t, representing about 8% of world steel output. ArcelorMittal's mining operations produced 47 million t of iron ore and 7 million t of metallurgical coal as well in 2010.

Peabody has engaged UBS and Bank of America Merrill Lynch as its financial advisers and Freehills as its legal adviser in relation to the potential transaction. ArcelorMittal has engaged RBC Capital Markets as its financial adviser and Mallesons Stephen Jaques as its legal adviser in relation to the potential transaction.

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