Baffinland finds suitor in friendly takeover bid

Workers plant explosives at the Mary River iron ore site on northern Baffin Island in an April, 2008 file photo. Mary River’s owner, Baffinland Iron Mines, urged shareholders Nov. 8 to accept a $433 million takeover bid filed by steel mining giant ArcelorMittal. (FILE PHOTO)

Updated Nov. 9, 11:28 a.m.

The Mary River iron ore project could soon have a new owner.

Baffinland Iron Mines announced Nov. 8 that it struck a deal that could see steel-making giant ArcelorMittal take over the Canadian junior mining firm for $433 million, or $1.10 per share.

The ArcelorMittal offer shuts the door on a hostile takeover bid launched earlier this fall by Nunavut Iron Ore Acquisition Corp., which was offering 80 cents per share for Baffinland.

“The ArcelorMittal offer delivers a significant premium to Baffinland shareholders over the unsolicited offer that was made previously,” said John Lydall, chair of a special committee of Baffinland’s board of directors.

“Following a thorough review of alternatives to maximize shareholder value, the Baffinland board of directors unanimously recommends that Baffinland shareholders tender their shares to the ArcelorMittal offer.”

Nunavut Iron Ore was founded in August by former Baffinland consultant Jowdat Waheed for the sole purpose of taking over Mary River. But Baffinland directors scoffed at the 80-cent offer, and criticized Nunavut Iron Ore’s offer as being “timed opportunistically.”

In a conference call with shareholders Nov. 9, Baffinland director Daniella Dimitrov said the ArcelorMittal offer is on the table for 35 days from Nov. 8, but that Baffinland could still sell to a higher bidder if such an offer came along.

ArcelorMittal needs to buy two-thirds of Baffinland shares to finalize the deal. It already has 26 per cent of Baffinland in so-called “lockup agreements” with Baffinland board members and the company’s single largest shareholder, Resource Capital Fund.

The purchase, which also needs regulatory approval under the Transportation Act and the Competition Act, gives ArcelorMittal a massive new supply of high-grade iron ore for use in its smelters.

Dimitrov said ArcelorMittal has set a goal of doubling its iron ore output to 100 million tons per year by 2015.

In a news release, ArcelorMittal’s chief financial officer said buying Baffinland is in line with the company’s strategy of expanding its mining holdings and wants to develop the Mary River project.

“ArcelorMittal already has a significant iron ore presence in Canada through ArcelorMittal Mines Canada and has the technical and project management expertise to develop the Mary River property,” said Aditya Mittal.

Nunavut Premier Eva Aariak told the Globe and Mail the proposed deal is “good news for Nunavut.”

“I hope they’ll invest in our people as much as they’ve invested in the mine,” she said.

In an email to Nunatsiaq News, ArcelorMittal spokesman Giles Read said his company supports the completion of a feasibility study on hauling ore from one Mary River deposit by road and the update of a second study on developing other deposits on the property.

Read also said the takeover wouldn’t affect training programs and “preferential employment opportunities” for Inuit workers from North Baffin communities.

ArcelorMittal produced about eight per cent of the world’s steel in 2009, generating revenues of US$65.1 billion. It has operations in more than 60 countries.

Baffinland shares spiked to a one-year high of $1.13 per share on the Toronto Stock Exchange Nov. 8.