Luxembourg-based steel goliath ArcelorMittal has announced that it will not extend its $492-million takeover bid for Canadian miner Baffinland Iron Mines Corporation (Baffinland) that expires on December 29, as the junior mining company has dropped its shareholder rights plan.
Baffinland's board has signed a definitive agreement with ArcelorMittal that will pay the global steel company a $15.5 million break fee if the deal falls apart.
On December 20, Toronto, Canada-based Nunavut Iron Ore Acquisition Inc. (Nunavut Iron), a subsidiary of US-based Iron Ore Holdings, LP, requested an emergency hearing by the Toronto-based Ontario Securities Commission to stop a shareholders' rights plan from being adopted.
The Ontario Securities Commission subsequently advised that the request of Nanavut Iron cannot be heard until January and requested that ArcelorMittal and Nunavut extend their bids until mid-January pending such a hearing. In this context, Baffinland agreed to drop its shareholder rights plan as the Ontario Securities Commission issued an order for the company to cancel the plan or so-called poison pill defense on December 29 if it was still in place by then.
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 its bid from C$1.1 a share on December 18. The offer expires on December 29.
Nunavut Iron said 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. The Nanavut offer expires on December 30.
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.
Following Baffinland's move to cancel the plan, it is now up to shareholders to decide between the two offers.
"This order [by the Ontario Securities Commission] removes an obstacle put in place by the Baffinland board of directors to deny its shareholders the opportunity to tender to Nunavut Iron's superior offer," said Nunavut chairman Bruce Walter.
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.
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