Anglo American takes Peabody to arbitration over failed $3.8B deal

Anglo American (LON: AAL) has launched arbitration proceedings against Peabody Energy (NYSE: BTU) after the US coal producer pulled out of a $3.8 billion agreement to acquire its Australian steelmaking coal assets.

The deal collapsed in August when Peabody invoked a “material adverse change” clause following a fire at Anglo’s Moranbah North mine in Queensland. The underground blaze, triggered by high gas levels, forced operations to halt in April and gave Peabody grounds to withdraw under the contract.

Anglo had planned to sell the Bowen Basin mines, located in the world’s top steelmaking coal region, as part of a broader strategy to divest non-core assets following last year’s failed takeover attempt by BHP (ASX: BHP).

Peabody said in a regulatory filing Friday that it remains confident the mine fire qualified as a material adverse change, justifying the deal’s termination. The company also revealed Anglo has so far refunded $29 million of a $75 million deposit and demanded repayment of the remainder “without further delay.”

Analysts have warned arbitration could drag on until late 2026 and force Anglo, Anglo, the world’s third-largest seaborne exporter of steelmaking coal, to restart the sales process in a weaker price environment.

For Peabody, the acquisition would have expanded its footprint in metallurgical coal, critical to steelmaking. Still, analysts had questioned the $3.8 billion price tag, which nearly doubled the market value of the St. Louis-based miner at the time.

Shares of Peabody jumped nearly 10% Friday to $32.20, giving the company a $3.93 billion market capitalization. Anglo’s stock rose 1.44% to 2,804p in London, valuing the miner at £33.24 billion ($45 billion).