UPDATE: Rio, Mitsubishi Offer To Buy A$10.6 Billion-Valued Coal & Allied

Rio Tinto PLC (RIO) and Japan's Mitsubishi Corp. (8058.TO) offered Monday to pay 122 Australian dollars (US$126) per share to buy out minority investors in Coal & Allied Industries Ltd. (CNA.AU), in an indicative offer that values the Australian coal miner at A$10.6 billion.

The joint bid for Australia's sixth-largest coal miner by output is the latest sign that competition for global coal resources is accelerating. Australia's stable political system and close proximity to Asian markets like China and India, where coal demand is booming, is making domestic mines especially attractive.

Peabody Energy Corp. (BTU) and ArcelorMittal (MT) on Aug. 1 launched a A$4.7 billion bid for Macarthur Coal Ltd. (MCC.AU), which is the world's biggest producer of a low-cost variety of coking coal used in steelmaking. A month earlier, Xstrata PLC (XTA.LN) offered around C$$147 million for Canada's First Coal Corp., which holds coking coal exploration licenses in Canada.

Rio and Mitsubishi would end up with stakes of 80% and 20%, respectively, in Coal & Aliied if the offer succeeds. The two companies currently own 75.7% and 10.2%, respectively, of the miner operating in the Hunter Valley of New South Wales state.

Fund manager Perpetual Ltd. (PPT.AU)--the only other major shareholder, with 6.3% of the stock--said it would support the bid.

"We have to determine whether the price is fair, but in the absence of a superior proposal this exceeds our valuation of net present value," James Bruce, the fund manager's resources portfolio manager, told Dow Jones Newswires.

"We would be seeking the independent directors to look at distributing the franking credits to the fullest extent possible," he said.

Net present value is a method of valuing companies which calculates the current value of future cash flows, while franking credits are distributed by Australian companies to ensure that shareholders are recompensed for the tax on their dividends.

Coal & Allied said it received the "incomplete, non-binding, conditional and indicative proposal" from Rio on Aug. 6. "CNA gives no assurances that the indicative proposal will lead to a takeover offer being made," the company said.

In a separate notice, Rio said shareholders would also retain a dividend due to be paid on 26 August, meaning the total cash amount would come to A$123.20 per share.

It has entered into a standstill agreement with Mitsubishi's Australian subsidiary, Mitsubishi Development Pty. Ltd., which would make the offer. The agreement would prevent either company acquiring additional shares in Coal & Allied for the next two months.

Coal & Allied sold 18.7 million tons of thermal coal and semi-soft coking coal during 2010 from its Mount Thorley, Warkworth, Bengalla, and Hunter Valley Operations mines.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com

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