RPT-DEALTALK-Is Arcelor bid for Baffinland really worth more?

* ArcelorMittal bids C$1.25/share for 100 pct of company

* Nunavut bids C$1.35/share for 50.1 percent

* Sources see value in Arcelor pledge to buy all shares

* Nunavut insists that its offer is superior

(Repeats story published on Sunday)

By Pav Jordan

TORONTO, Dec 19 (BestGrowthStock) – Why would ArcelorMittal
(ISPA.AS: ) make a counteroffer for Baffinland Iron Mines

At least two sources close to the proceedings say the
world’s largest steelmaker knows exactly what it’s doing.
Indeed, Arcelor’s C$1.25-a-share ($1.23) bid, which came in
response to a C$1.35-a-share offer from Nunavut Iron Ore, is a
lot sweeter on second glance, the sources say.

Arcelor, which made its latest offer for the Canadian
junior miner on Saturday, also lowered the minimum number of
shares needed to complete the deal to 50 percent plus one share
while pledging to purchase all shares tendered.

That’s key to the value inherent in the Luxembourg-based
steelmaker’s offer, the sources say.

Arcelor also raised the break-up fee that would be paid if
the deal falls through, while Baffinland’s board, which has
endorsed Arcelor’s bid, adopted a takeover defense against
other rivals.

Nunavut Iron, which controls about 10 percent of Baffinland
shares, has offered C$1.35 a share for 50.1 percent of the
company’s shares.

In a Sunday statement it asserted again that its offer is
superior and said it would ask regulators to block the rights
plan. [ID:N19174632] Nunavut was not immediately available for
further comment.

ArcelorMittal, with lockup agreements with key shareholders
and Baffinland directors holding about 25 percent of the stock,
says it’s willing to pay only C$1.25 per share, but for 100
percent of the company stock.

“The Nunavut bid is for only 50.1 percent of the shares, so
if you are a Baffinland shareholder you get the C$1.35 a share
for 40 percent of your shares and whatever the shares trade at
for the remainder,” said one source with close knowledge of the
Arcelor offer.

“So if you just do the math in weighted terms, for the
Nunavut bid to be above C$1.25, shareholders would have to
assume they’ll get at least C$1.10 on the open market … which
is way above where it was trading before these bids
materialized.”

Baffinland stock touched a low this year of around 35
Canadian cents a share.

The company is seeking partners to help it develop a
deposit in the Canadian Arctic that is said to contain enough
iron ore to supply the entire European market. But it would
take C$4 billion to develop the deposit.

After Nunavut made its first bid for the company, for 80
Canadian cents a share, the stock hit a 23-month high of 94
Canadian cents.

In November, ArcelorMittal followed that with its own bid,
a friendly offer worth C$1.10 a share, locking up support for
its bid from Baffinland’s biggest shareholder, Resource Capital
Funds, as well as the company’s directors.

LOCK-UP AGREEMENTS

The source close to the deal said those lock-up agreements
helped Arcelor lower the number of shares needed to proceed
because there was more certainty in completing a deal.

The bid also put an end to other talks between Baffinland
and Arcelor to develop the Mary River project together.

Supporters of the ArcelorMittal offer also say the stock
might sink back to pre-bid levels if shareholders tender to
Nunavut.

“So if you have a million shares, you can cash in only half
of them to the offer,” said another source with knowledge of
the offers.

“The C$1.35 a share is something completely uncertain,
given that the shares were trading at 55 cents before these
bids were launched,” said the first source.

If shareholders tender their shares to the Nunavut bid, and
then get 80 Canadian cents for each of their shares on the open
market, he said, they would receive a net value on their shares
of some C$1.13 a share.

($1 = $1.01228 Canadian)
(Editing by Frank McGurty)

RPT-DEALTALK-Is Arcelor bid for Baffinland really worth more?