U.S. miner Peabody Energy's $3.8 billion bid for Macarthur Coal gained traction on Monday as one of two rival deals involving the Australian miner hit the skids.

Shareholders of commodity trader Noble Group rejected a proposal to sell a stake in Gloucester Coal to Macarthur, the world's leading exporter of a cheaper, cleaner coal coveted by steelmakers.

Macarthur has recently rejected sweetened bids from both Peabody and local rival New Hope Corp , favoring a deal under which it would take over Gloucester, and Noble would take a one-quarter stake in Macarthur.

With Noble shareholders having voted down the Gloucester sale, it has by default cleared a key hurdle for the two bidders, said Andrew Pedler, a resource analyst at Wilson HTM.

The bids lodged by Peabody and New Hope were conditional on Macarthur not proceeding with the Gloucester takeover. Macarthur's board is now free to solicit bids, if they so choose.

Macarthur's top shareholder CITIC Resources <1205.HK> earlier said it had not yet decided whether to support Peabody's A$16 a share offer, which had trumped New Hope's bid.

CITIC Resources, a founding shareholder of Macarthur with 22.4 percent, had said it supported the rationale for Macarthur's takeover of Gloucester, but needed more time and information to weigh the Peabody offer.

In a brief statement, Noble said its shareholders soundly defeated the plan to sell Gloucester Coal -- effectively taking it out of the running.

Coal producers are chasing Macarthur for its high profile in pulverized coal, or PCI, sought by steelmakers at a time when coal prices have nearly doubled on hot demand from China and India.

Macarthur shares closed flat on Monday, holding at around 3 percent above Peabody's offer, having been supported last week by talk London-listed Xstrata may join the fray.

Peabody's bid is now close to what will be accepted. It's now a question of negotiation unless Xstrata comes in. Then it's a different ball game, said Tom Elliott, head of hedge fund MM&E Capital.

KEEP STAKE

Under Peabody's offer, Macarthur's top three shareholders -- CITIC Resources and steel giants ArcelorMittal and POSCO <005490.KS> -- would be allowed to retain their stakes.

POSCO, which owns 8.3 percent, backs the deal in principle and says it plans to keep its stake for now, while ArcelorMittal, with 16.6 percent, says the bid merits consideration.

The two steel producers bought into Macarthur two years ago at A$20 a share, when it was being chased by Swiss-based Xstrata, as they sought to ensure the company did not fall into the hands of a major coal producer.

MM&E's Elliott said CITIC was more of a financial investor, noting it, too, had bought into Macarthur at closer to A$20 a share and would want to hold out for a higher bid.

Macarthur had said on Friday it would enter into talks with Peabody, and postponed a vote by its shareholders on the Gloucester deal.

The rejection from shareholders means that Macarthur and Noble will go their own way, and Noble is likely to take Gloucester private, said a Singapore-based equity analyst, who declined to be identified.

M&A FEVER

Adding to the flurry of interest in coal miners, Australia's White Energy made a A$39 million cash and scrip offer for South Australian Coal Ltd (SACL), aiming to use its own technology to upgrade SACL's coal for export.

SACL was spun off to Felix Resources shareholders last year when Felix was taken over by Chinese firm Yanzhou Coal Mining Co <1171.HK> for $3 billion.

White Energy has poached the managing director of Felix, Brian Flannery, to work alongside Felix's former chairman, Travers Duncan, who, with a third investor, plan to invest A$75 million in new SACL shares.

(Additional reporting by Neil Chatterjee and Harry Suhartono in SINGAPORE and Michael Perry in SYDNEY; Editing by Mark Bendeich and Ian Geoghegan)

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