Initially South32 had agreed to pay at least $200 million (R2.67 billion) for the assets last year, but “Australian regulators raised concerns about the sale weakening competition among coal suppliers to domestic steelmakers”, South32 said in a statement.
South32 said it was not prepared to make significant concessions in favour of Australian steel makers that would likely be required to mitigate the competition issues.
South32 said 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 chief executive Graham Kerr said: “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 we are prepared to do.”
South32, the coal and metals miner spun out of BHP Billiton in 2015, agreed in November to buy Peabody’s Metropolitan Colliery and an associated 17 percent stake in the Port Kembla Coal Terminal, south of Sydney.
The deal would have been its first merger and acquisition activity success after being beaten by China Molybdenum for Anglo American’s $1bn niobium and phosphate business in Brazil last year.
Metropolitan, 10km east of South32’s Appin Colliery, has the capacity to generate 2.3 million tons of coal a year.
The failed deal comes just as coal prices are surging amid weather-related disruptions in Australia and just two weeks after St Louis-based Peabody emerged from bankruptcy and re-listed on the New York Stock Exchange.
South32 closed 3.4 percent down at R27.86 on the JSE.