In a surprise decision, steel giant ArcelorMittal SA said Tuesday it has decided to pull out of its joint $4.9 billion bid with US coal miner Peabody Energy Corp to acquire Australian coal producer Macarthur Coal Ltd.

ArcelorMittal provided notice to Peabody Energy that, in accordance with the Co Operation and Contribution Agreement between the two companies, following its acceptance of PEAMCoal Pty Ltd’s offer for Macarthur Coal Ltd, it has terminated the Co Operation and Contribution Agreement as provided for therein.

ArcelorMittal will remain a shareholder in PEAMCoal until the termination arrangements are completed which is expected to be in approximately 90 days’ time.

In taking this decision, ArcelorMittal has determined that it would no longer be appropriate to allocate substantial capital to the acquisition of a non controlling, minority business interest. This is in accordance with the rights that ArcelorMittal originally negotiated with Peabody at the time the Co-Operation and Contribution Agreement was concluded.

Given the unanticipated level of acceptances into the offer, ArcelorMittal believes that it is more appropriate to focus its capital elsewhere in its business. ArcelorMittal considers that the capital commitment that would be required to retain its Macarthur interest and grow it materially further, exceeds what is appropriate to allocate to a business that ArcelorMittal does not fully control and consolidate.