ArcelorMittal raises Baffinland offer to $551 Million amid takover battle

ArcelorMittal, the world’s largest steelmaker, increased its offer for Canada’s Baffinland Iron Mines Corp. as it seeks to win over shareholders amid a three- month takeover battle.
ArcelorMittal bid C$1.40 ($1.40) a share in cash for all Baffinland shares, the Luxembourg-based company said today in a statement. That’s 27 percent more than its original offer and compares with a C$1.40 hostile bid for 60 percent of Baffinland’s stock from Nunavut Iron Ore Acquisition Inc. this week.
“This is the knockout punch,” Peter Campbell, an analyst at Jennings Capital Inc. in Toronto, said today in a telephone interview. “I suppose Nunavut could secure additional funds, but this is getting expensive for them.” He valued the bid at C$550.7 million, not including outstanding warrants.
Nunavut, a venture formed in August to buy Baffinland, and ArcelorMittal are vying to gain control of the Mary River iron- ore project in the Arctic. ArcelorMittal, which on Dec. 18 raised its offer to C$1.25 a share, is seeking greater access to the steelmaking ingredient as prices climb. Baffinland’s board today recommended that holders tender their shares to the ArcelorMittal offer.
Baffinland advanced 5 cents, or 3.6 percent, to C$1.43 at 3:59 p.m. in Toronto Stock Exchange trading. The shares have more than doubled this year.
‘Tremendous Upside’
“We will be considering our options in light of Arcelor’s new offer,” Nunavut’s Chairman Bruce Walter said today in an e- mail. “Given the tremendous upside of the Mary River project if it is developed under strong ownership, there are many shareholders who understand that our current bid still provides better economic value to them than the Arcelor offer.”
“We’re fully supportive” of the ArcelorMittal offer, Daniella Dimitrov, vice chairwoman of Toronto-based Baffinland, said in a telephone interview.
ArcelorMittal’s increased offer provides “demonstrably superior value and certainty for Baffinland shareholders, compared to Nunavut Iron Ore Acquisition Inc.’s revised coercive partial offer,” Peter Kukielski, ArcelorMittal’s head of mining, said in the statement.
Bidding War
The increased bid is 150 percent more than Baffinland’s price prior to Nunavut’s original 80-cent offer in September. ArcelorMittal entered the bidding when it agreed to pay C$1.10 in November, an approach that was countered by Nunavut with a C$1.35-a-share bid for 50.1 percent of the company on Dec. 15. Nunavut is backed by U.S. private equity firm Energy & Minerals Group.
ArcelorMittal’s bid is open for acceptance until 11:59 p.m. Toronto time on Jan. 10, the company said in the statement. Tom Johnson, a spokesman for ArcelorMittal in New York, had no comment beyond the press release.
Prices for iron ore and coking coal have surged this year because of demand from China, the largest steel producer. The cost of iron ore almost doubled in the April quarter and gained more than 20 percent in the June-to-September period.
ArcelorMittal said in September it planned to spend $4 billion to increase iron-ore production to 100 million metric tons a year by 2015.
The Mary River deposit, which holds reserves of 365 million metric tons of iron ore, is located about 620 miles (1,000 kilometers) northwest of Iqaluit, the capital of Nunavut, the largest of Canada’s three northern territories.
Gordon McCreary, the former Baffinland chairman who is seeking an outside bid from a Chinese company, said last week that discussions with a state-owned company are in an “advanced state.” He resigned from Baffinland’s board in November over its acceptance of ArcelorMittal’s first offer, which he considered too low.
Courtsey news via Bloomerg by the reporter Natalie Doss in New York at ndoss@bloomberg.net.