Bidder's Statement - Peabody Energy

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9 Tax considerations 9.1 Introduction The following is a general description of the Australian income and capital gains tax, GST and stamp duty consequences to Macarthur Shareholders of the acceptance of the Offer. The comments set out below are relevant only to those Macarthur Shareholders who hold their Shares as capital assets for the purpose of investment. The following description is based upon the Australian law and administrative practice in effect at the date of this Bidder’s Statement, but it is general in nature and is not intended to be an authoritative or complete statement of the laws applicable to the particular circumstances of every Macarthur Shareholder. Macarthur Shareholders should seek independent professional advice in relation to their own particular circumstances. 9.2 Australian resident shareholders – investment held on capital account Acceptance of the Offer will involve the disposal by Macarthur Shareholders of their Shares by way of transfer to PEAMCoal. This change in the ownership of the Shares will constitute a capital gains tax event for Australian capital gains tax purposes. Macarthur Shareholders who are Australian residents may make a capital gain or capital loss on the transfer of their Shares, depending on whether their capital proceeds from the disposal of the Shares are more than the cost base (or in some cases indexed cost base) of those Shares, or whether their capital proceeds are less than the reduced cost base of those Shares. The capital proceeds of the capital gains tax event will be the consideration price per Share payable under the Offer received by the Macarthur Shareholder in respect of the disposal of the Shares. The cost base of the Shares include their cost of acquisition and any incidental costs of acquisition and disposal that are not deductible to the Macarthur Shareholder. Capital gains and capital losses of a taxpayer in a year of income are aggregated to determine whether there is a net capital gain. Any net capital gain is included in assessable income and is subject to income tax. Capital losses may not be deducted against other income for income tax purposes, but may be carried forward to offset against future capital gains. 9.4 Non‐resident shareholders Capital gains derived by a non-resident (that is, a person or entity who is not a resident for Australian tax purposes) (Non-Resident) are generally only subject to income tax in Australia to the extent that they relate to relevant direct and indirect interests in Australian real property. Where a Non-Resident Shareholder indirectly holds an interest in Australian real property through shares in a company, any capital gains may trigger a CGT liability. It is possible that Macarthur is a company whose interest in land (via its various mining tenements) may be at least 50% of the assets of the company as defined. It follows that a Non-Resident Macarthur Shareholder could be considered to hold an indirect interest in Australian real property. However, capital gains are not subject to tax in Australia where a Non-Resident Shareholder holds less than 10% of the interests in that company at the time of the disposal and has not held 10% or more of the interests for a period of 12 months at any time in the two years prior to disposal. As a result, a Non-Resident Macarthur Shareholder who (together with its associates) holds less than a 10% interest in Macarthur at the relevant times should not be subject to Australian income tax resulting from any capital gain derived in relation to the disposal of Shares. Non-Resident Macarthur Shareholders who (together with their associates) hold a 10% or more interest in the Shares on issue over the relevant period should seek further independent advice in relation to these matters. 9.5 Goods and services tax Macarthur Shareholders should not be liable to GST in respect of the acceptance of the Offer. 9.6 Stamp duty Macarthur Shareholders will not be subject to stamp duty impost on the acceptance of the Offer. 9.3 Capital gains tax reductions – Individuals, complying superannuation funds and trustees of trusts Individuals, complying superannuation entities or trustees that have held Shares for at least 12 months but do not index the cost base of the Shares should be entitled to discount the amount of the capital gain (after application of capital losses) from the disposal of Shares by 50% in the case of individuals and trusts or by 33% for complying superannuation entities. 34
10 Other material information 10.1 Regulatory approvals (a) FIRB approval Peabody, ArcelorMittal and PEAMCoal are foreign persons under the FATA. On 12 August 2011, PEAMCoal announced that the Treasurer of the Commonwealth of Australia, on advice from FIRB, had issued a statement of no objection under the FATA to the Takeover Bid. Accordingly, the condition in section 11.7(a) of this Bidder’s Statement has been fulfilled so that the Offer has become free from that condition. (b) Non-Australian regulatory approvals Peabody Energy, ArcelorMittal and Macarthur carry on business in countries outside of Australia. In some of these countries, transactions like the one contemplated by the Offer are subject to prior approval from competition regulators. Accordingly, completion of the Offer is conditional on certain regulatory clearances or confirmations, being: • clearance from the Ministry of Commerce of the People’s Republic of China (MOFCOM) or expiry of the relevant waiting period; and • clearance from Japan’s Fair Trade Commission (JFTC) or expiry of the relevant waiting period. PEAMCoal has filed its application with MOFCOM and the JFTC. It is difficult to estimate the timing of formal responses from MOFCOM and JFTC. PEAMCoal will disclose any material developments relating to these clearance applications. The European Commission’s directorate general for competition has issued an opinion confirming that the EU Merger Regulation does not apply to the Takeover Bid. As a result, Peabody Energy and ArcelorMittal have no obligation to notify the Takeover Bid to the European Commission for regulatory approval. Accordingly, completion of the Offer is not conditional on receipt of clearance from the European Commission. 10.2 Co-operation and Contribution Agreement (a) Overview PEAMCoal, PEAMCoal Holdings, PAC2, AM and AM BV2 have entered into the Co-operation and Contribution Agreement. A draft of the Co-operation and Contribution Agreement was released to the ASX on 13 July 2011 and is available at www.asx.com.au. The final version of the Cooperation and Contribution Agreement as entered into between the parties was not materially different from the version released to the ASX on 13 July 2011. The key terms of the Co-operation and Contribution Agreement are summarised below. (b) Conduct of the Takeover Bid The parties are jointly responsible for the conduct of the Takeover Bid and for making all material decisions in relation to the Offer. However, PAC2 alone is responsible for any decision to extend the Offer Period up to an aggregate duration of 6 months – any decision to extend the Offer Period beyond this period is to be jointly made by PAC2 and AM. AM and PAC2 each have observer rights at PEAMCoal Holdings and PEAMCoal board meetings until the end of the Offer Period. (c) Funding of the Takeover Bid PAC2 and AM BV2 will subscribe for shares in PEAMCoal Holdings in proportion to their current shareholding in PEAMCoal Holdings, being 60% and 40% respectively. The subscription consideration will be paid to PEAMCoal Holdings in Australian dollars during the Offer Period and the shares in PEAMCoal Holdings will be issued to PAC2 and AM BV2 following the end of the Offer Period. The subscription consideration will only be used by PEAMCoal Holdings to fund: • PEAMCoal’s acquisition of Shares during the Offer Period; • if PEAMCoal becomes entitled to and exercises its right to compulsorily acquire any outstanding Shares under Chapter 6A of the Corporations Act, PEAMCoal’s acquisition of Shares pursuant to such compulsory acquisition; and • PEAMCoal’s payment obligations in respect of any duty arising in connection with PEAMCoal’s acquisition of Shares. (d) Compulsory acquisition PEAMCoal must exercise its right to compulsorily acquire any outstanding Shares under Chapter 6A of the Corporations Act if it acquires the right to do so. (e) Exclusivity During an exclusivity period which runs until the date which is 6 months after the date of the Offer, Peabody Energy, ArcelorMittal, each of their group companies and their advisers, directors, officers and employees are subject to ‘no shop’ and ‘no talk’ obligations in relation to, and are prevented from participating in a consortium, joint bidding structure or similar structure in connection with, an actual, proposed or potential competing proposal. The parties are also under notification obligations in relation to any direct or indirect approach, attempt to initiate negotiations or discussions, proposal or similar (including an intention to do so) in relation to an actual, proposed or potential competing proposal. Furthermore, AM has agreed that it will during the exclusivity period: • not Deal, and will ensure that none of its related bodies corporate will Deal, in the 16.1% parcel of Shares that it or they own or control; and • will vote the 16.1% parcel of Shares against, or will ensure that those Shares are voted against, any competing proposal. (f) Termination The Co-operation and Contribution Agreement will terminate if: (1) not all of the defeating conditions to the Offer have either been freed or fulfilled by the end of the Offer Period; (2) PEAMCoal is entitled to withdraw unaccepted Offers under the Takeover Bid and withdraws those unaccepted Offers in accordance with section 652A of the Corporations Act; or (3) AM or AM BV2 tenders the Shares it owns into the Offer and AM advises PAC2 and PEAMCoal Holdings by written notice before the end of the Offer Period that it wishes to terminate the agreement. If the Co-operation and Contribution Agreement is terminated as contemplated by paragraph (1) or (2) above, AM BV2 will sell, and PAC2 will purchase, the shares in PEAMCoal Holdings held by AM BV2 for an amount equal to the price paid for such shares when they were issued to AM BV2, subject to adjustment in certain cases. If AM causes the Co-operation and Contribution Agreement to be terminated as contemplated by paragraph (3) above, AM will sell, and PAC2 will purchase, the shares in AM BV2 from AM (causing AM to exit its investment in PEAMCoal Holdings and Macarthur) for an amount equal to the sum of: • the aggregate of all amounts received by PEAMCoal Holdings from AM BV2 until the end of the 90 day period following the provision of the termination notice pursuant to AM BV2’s subscription obligations under the Co-operation and Contribution Agreement (noting that AM BV2 must continue funding PEAMCoal through AM BV2’s subscription obligations until the end of that 90 day period - PEAMCoal would only ever extend the Offer Period beyond the end of this 90 day period if Peabody Energy has made appropriate alternative funding arrangements available to PEAMCoal); 35
Page 1 and 2: This is an important document and r
Page 3 and 4: Key dates Date original Bidder’s
Page 5: letter to shareholders 4 August 201
Page 8 and 9: 1 Why you should accept the Offer 1
Page 10 and 11: As demonstrated in Figure 3, Macart
Page 12 and 13: 2 Summary of the Offer What PEAMCoa
Page 14 and 15: Peter Kukielski Peter Kukielski is
Page 16 and 17: Map 1: U.S. mining Operations Map 2
Page 18 and 19: 4.4 Directors of Peabody Energy Bri
Page 20 and 21: At 30 June 2011 (US$ millions) (Una
Page 22 and 23: 5 Information on ArcelorMittal 5.1
Page 24 and 25: Mr. Kaden is a member of the Counci
Page 26 and 27: Consolidated 31 December 2010 (in m
Page 28 and 29: *as required by IFRS, the informati
Page 30 and 31: ASX maintains files containing publ
Page 32 and 33: (being approximately A$4.40 billion
Page 34 and 35: of personnel impacted is expected t
Page 38 and 39: • an amount equal to all interest
Page 40 and 41: As at the date of the Offer: • PE
Page 42 and 43: 11 The terms and conditions of the
Page 44 and 45: Rights in respect of the Relevant S
Page 46 and 47: (g) matter or thing becomes known t
Page 48 and 49: (j) (k) Renewal of tenements Betwee
Page 50 and 51: Term Encumbrance FATA Meaning an in
Page 52 and 53: Term Voting Power VWAP Your Shares
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Bidder's Statement - Peabody Energy

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