May 21 (Bloomberg) -- ArcelorMittal, the world's biggest steelmaker, may offer at least A$4.2 billion ($4 billion) for Australia's Macarthur Coal Ltd. to secure supplies as prices for raw materials surge.

Macarthur rose 8.1 percent in Sydney trading after Luxembourg-based ArcelorMittal said it paid A$631 million for a 14.9 percent stake. Brisbane-based Macarthur today said a potential rival bidder had pulled out of talks.

ArcelorMittal wants Macarthur, the world's biggest maker of pulverized coal used by steelmakers, to increase its self- sufficiency in coking coal from 10 to 15 percent after a tripling in prices this year. Australia is the world's largest exporter of the coal.

``Everybody who wants to be in the game would want to be as self-sufficient as possible,'' said Alfred Wong, a senior portfolio manager at Unifund in Hong Kong. ``Australia appears to be quite a natural place, they have got good mines, they have got a good workforce, they have got a good government.''

Macarthur climbed $1.48 in Sydney trading to A$19.86 at the 4:10 p.m. close of the Australian stock exchange, giving it a market value of A$4.2 billion. The stock, which is trading at 79 times estimated earnings, has risen 50 percent since the company said April 21 it had been approached about a possible transaction.

ArcelorMittal paid A$19.96 a share for its 14.9 percent stake, which is just under the 15 percent holding that would require approval from Australia's Foreign Investment Review Board.

A$1 Billion Stake

ArcelorMittal bought a 4.3 percent stake from Macarthur's largest shareholder and founder Ken Talbot and the balance from private investor Nathan Tinkler, the company said in an e-mailed statement. Talbot, who is being investigated by Queensland's Crime and Misconduct Commission, didn't return calls for comment.

Global steelmakers including Nippon Steel Corp. are seeking to invest in producers as well as mines to lock in long-term supplies. Nippon Steel wants to invest in Cia. Vale do Rio Doce's $1.4 billion planned coal mine in Mozambique, the company said yesterday. Macarthur Coal's pulverized coal is used by steelmakers as a cheaper alternative to coking coal.

``There's very few steel mills actually globally that have much sufficiency in coking coal,'' Andrew Driscoll, a Hong Kong- based analyst at CLSA Ltd., said today in Singapore.

A coal producer may pay as much as A$24.25 a share, or A$5.1 billion, for Macarthur taking into account potential cost savings of A$20 million a year, UBS AG said in a report yesterday.

Mining Takeovers

There have been $57 billion mining and energy takeovers this year in Australia, the world's No. 1 exporter of iron ore, coal and alumina, compared with $29 billion in 2007, according to Bloomberg data. Xstrata Plc, named by the Wall Street Journal as being in talks with Macarthur, bought Australian coal producer Resource Pacific Holdings Ltd. for A$1.1 billion this year.

Macarthur is being advised by JPMorgan Chase & Co.

Xstrata, Anglo American Plc and Vale may benefit from buying Macarthur, Sophie Spartalis, an analyst at Macquarie Group Ltd., said last month. Other possible buyers include Noble Group Ltd. and Macarthur's second-largest shareholder Citic Group, backed by the Chinese government, UBS analysts led by Sydney-based Glyn Lawcock said.

ArcelorMittal, formed in 2006 after billionaire Lakshmi Mittal's Mittal Steel Co. bought Arcelor for $38.3 billion, became the third-biggest shareholder in Macarthur.

The A$20 price is at the ``high end'' of recent transaction multiples, which have been completed at between 9 and 10 times future earnings, UBS' Lawcock said in the report.

Talbot, Tinkler

``Citic in our view holds the key to whether any potential corporate action turns hostile,'' UBS said. ``They may not wish to see the company's ownership change hands.'' Citic spokeswoman Susanna Chau wasn't immediately available to comment.

Macarthur Chairman Keith De Lacy and Xstrata spokesman James Rickards didn't return calls seeking comment.

Macarthur produces 35 percent of the global supply of pulverized coal from two mines, Coppabella and Moorvale, in Australia's Queensland state. ArcelorMittal wants Macarthur for its pulverized coal output and to increase its advantage in annual contract price talks with suppliers, CLSA's Driscoll said.

Prices of coking coal will stay at records next year because of rising demand for steel and as higher costs delayed the construction of new mines, Macquarie Group Ltd. said in a May 5 report. The price of pulverized coal will be $245 a ton, up 63 percent from its previous estimate of $150 a ton, the bank said. Macarthur received between $67 and $68 a ton for pulverized coal in 2007, the company said in February.

Macarthur will be able to more than double output in the next four years as its allotted capacity at Dalrymple Bay port is increased from 4 million tons a year to 8.8 million tons, Macquarie's Spartalis said in an April 22 report.