Toronto, Canada-based Nunavut Iron Ore Acquisition Inc. (Nunavut Iron), a subsidiary of US-based Iron Ore Holdings, LP, has requested an emergency hearing by the Toronto-based Ontario Securities Commission to stop a shareholders' rights plan adopted by the board of Baffinland Iron Mines Corporation (Baffinland) regarding an acquisition by Luxembourg-based steel goliath ArcelorMittal.
In a December 19 statement announcing the application decision, Nunavut Iron claimed that the break-up fee to be paid to ArcelorMittal was designed to deny shareholders' right to choose.
The Baffinland board has approved an offer of C$1.25 ($1.23) per share for 100 percent of the shares from ArcelorMittal, which raised the bid from C$1.1 a share on December 18.
Nunavut Iron said in a statement a day later that ArcelorMittal's offer was still inferior to its sweetened C$1.35 per share offer for 50.1 percent of Baffinland, a percentage it cut from 66.67 percent. The company currently owns 10.5 percent of Baffinland.
ArcelorMittal, bidding for the entire company with a minimum condition of 50 percent plus one share acceptance, insists its rival's bid is not actually worth more to investors. The steel giant and 25.5 percent of Baffinland's stock are in lock-up agreements.
Baffinland's board has signed a second additional definitive agreement with ArcelorMittal that will pay the global steel company a $15.5 million break fee if the deal falls apart, up from $11 million.
"We believe that Baffinland shareholders should also be appalled by their board's $4.5 million increase in the break fee that would be payable to ArcelorMittal, raising it to $15.5 million," Bruce Walter, chairman of Nunavut Iron, said. "In effect, the board is using funds that belong to the shareholders in an effort to prevent shareholders from choosing Nunavut Iron's superior offer," he added.
Baffinland's Mary River project has proven reserves of about 365 million metric tons of ore, grading an average of 65 percent iron, and about 500 million mt of ore resources. Baffinland has been looking for partners for the C$4 billion project for some months now, which is expected to produce 18 million mt per year.
ArcelorMittal has already received the necessary approvals for acquisition from local authorities.