Nunavut says it won’t give up fight for Baffinland

By Julie Gordon

TORONTO (BestGrowthStock) – Nunavut Iron Ore said on Monday it had applied to regulators to block a new shareholders rights plan announced by Baffinland Iron Mines (BIM.TO: ) and that it would not drop its plan to buy a controlling stake in the exploration company.

The move is the latest chapter in a bidding war pitting Nunavut, backed by a U.S. private equity firm, against ArcelorMittal (ISPA.AS: ), the world’s largest steelmaker. Baffinland, their Toronto-based target, holds a vast iron ore deposit in the Canadian Arctic.

The board of Baffinland has turned its back on Nunavut’s C$1.35-a-share offer, valuing the company at about C$467 million ($437.7 million), and embraced a deal with Arcelor, which has sweetened its bid to C$1.25 a share.

Nunavut said the new rights plan, announced on Saturday, ran counter to intent of the Ontario Securities Commission when the regulator blocked a previous “poison pill” plan put forward by Baffinland’s board.

“It is inexcusable for the Baffinland board to be disenfranchising their shareholders and not letting them have the choice,” said Nunavut Chairman Bruce Walter in an interview with Reuters.

Baffinland’s board on Saturday said it endorsed ArcelorMittal’s sweetened offer, accepting a higher break-up fee to be paid if the deal falls through, and said it would adopt an antitakeover defense against unwanted suitors.

But Nunavut’s Walter said investors were showing their support for his company’s offer by bidding up the shares.

“The stock is trading above $1.30 – if the market were viewing our bid as a somehow negative event … you wouldn’t see the stock trading the way it is,” Walter said.

Shares of Baffinland were down slightly at C$1.31 on Monday on the Toronto Stock Exchange, but much higher than the closing price of 56 Canadian cents the day before the first bid was announced.

In September, Nunavut offered 80 Canadian cents a share for Baffinland. Arcelor countered with an offer of C$1.10.

WHICH BID IS SUPERIOR?

Arcelor said on Monday that its offer for the Canadian junior miner was superior because it was for 100 percent of Baffinland shares. The sweetened offer, announced on Saturday, lowered the minimum number of shares needed to complete the deal to 50 percent plus one share but Arcelor pledged to purchase all shares tendered.

Nunavut’s offer is restricted to 50.1 percent of the shares, as the company cut the percentage it would require to complete a deal down from two-thirds.

“We don’t need to get into a fight as to whether our bid is viewed as superior or not,” said Walter. “All we’re asking for is that shareholders be given the opportunity to choose.”

But Baffinland’s acting chief executive, Richard McCloskey, said the board was supporting the Arcelor offer because it guaranteed C$1.25 per share for all outstanding shares.

“That C$1.25 is the best bid on the table right now,” McCloskey said in an interview on Monday. “And we’re supporting that bid with our own shares.”

McCloskey said the Nunavut offer would see 50 percent of shares going for the full C$1.35, while the other 50 percent would be left to the open market to value.

Walter said the Nunavut management team has a “considerable understanding on what’s involved in bringing large projects into production” and could provide added value for existing Baffinland shareholders going forward.

At stake is the Mary River project in the remote Canadian territory of Nunavut, which will cost an estimated C$4 billion to develop. The deposit, located on Baffin Island, is believed to hold enough ore to supply all of Europe.

Nunavut, owned by U.S. based-Iron Ore Holdings LP, was formed in August specifically for the purpose of bidding on Baffinland. Both Nunavut and its parent are backed by the Energy and Minerals Group, a private equity investor.

(Additional reporting Pav Jordan; Editing by Frank McGurty)

Nunavut says it won’t give up fight for Baffinland