Nunavut Iron Ore Ups Bid for Baffinland

Nunavut Iron Ore, which is backed by private equity firm Energy and Minerals Group, sweetened its offer for Baffinland Iron Mines on Wednesday, Reuters reported. Nunavut Iron increased its hostile bid to $1.40 Canadian dollars ($1.40), up from $1.35. The group wants to take a 60% stake in Baffinland. ArcelorMittal, the world’s largest steel producer, previously bid C$1.25 a share in a friendly buyout offer, and has no plans to increase the bid, Reuters reported. Baffinland controls a vast iron-ore deposit in the Canadian Arctic.

(Reuters) Nunavut Iron Ore sweetened its hostile bid for Baffinland Iron Mines on Wednesday, in its tug of war with steel giant ArcelorMittal for the junior miner’s vast iron ore deposit in the Canadian Arctic.

Nunavut Iron upped its offer to C$1.40 a share for 60 percent of Baffinland’s shares, challenging ArcelorMittal’s friendly bid of C$1.25 a share for all of the shares.

Nunavut, backed by U.S. private equity firm Energy & Minerals Group, had earlier offered C$1.35 a share for 50.1 percent of Baffinland’s shares. It already holds about 10 percent.

At stake is Baffinland’s huge iron-ore deposit in the northern Canadian territory of Nunavut, which is believed to be large enough to meet all of Europe’s needs for years.

A spokeswoman for Toronto-based Baffinland was not immediately available for comment.

Shares of Baffinland were up 2 Canadian cents, or 1.5 percent, at C$1.36 on the Toronto Stock Exchange on Wednesday morning. Prior to Nunavut Iron’s original offer of 80 Canadian cents a share in September, Baffinland shares were at 56 Canadian cents.

At that time, Baffinland was looking for partners for its flagship Mary River project in Nunavut, and was discussing a possible joint venture with ArcelorMittal, the world’s largest steel maker.

ArcelorMittal declined to comment on Wednesday on the new Nunavut Iron bid, but a source with direct knowledge of the ArcelorMittal offer said the company would not raise its bid. [ID:nWNA8033]

A week ago it said it would not hold its bid for Baffinland past Wednesday. [ID:nN19149286]

In response, Baffinland agreed to drop its poison pill defense against Nunavut’s hostile bid, allowing shareholders to tender their stock.

ArcelorMittal said recently it has lockup agreements with key shareholders and Baffinland directors holding about 25 percent of the stock.

If Nunavut — which was formed solely to buy Baffinland — were to buy the entire company, the C$1.40 per share bid would value the junior miner at about C$550 million ($550 million). ArcelorMittal’s offer values the company at around C$490 million.

Nunavut Iron said its new bid is for 195,312,171 common shares, worth about C$273 million, plus the roughly 10 percent of Baffinland stock it already owns.

Nunavut’s bid is for only 60 percent of Baffinland, but the company plans to offer a warrant component that would allow shareholders who cannot immediately tender their shares to take advantage of future value of the company once the giant deposit is developed at an estimated cost of about C$4 billion. That component of the offer is subject to approvals from regulators.

“Nunavut Iron has spent considerable time meeting with and soliciting the views of Baffinland shareholders,” Bruce Walter, chairman of Nunavut Iron, said in a statement.

“This increased offer, and our new proposals for Baffinland, address shareholder suggestions and make our offer even more attractive, while preserving appropriate flexibility,” Walter said. “Our increased offer will provide Baffinland shareholders superior value to the ArcelorMittal offer of C$1.25 per share.”

Nunavut also said the deadline for its sweetened offer was extended to Jan. 10.

($1=$1.00 Canadian) (Additional reporting by Pav Jordan in Toronto and Robert-Jan Bartunek in Brussels, editing by Dave Zimmerman and Rob Wilson)