Bidding war for Baffinland escalates as Nunavut tops ArcelorMittal’s offer

The battle for control of Canadian iron ore miner Baffinland Iron Mines Corp yesterday escalated after Nunavut Iron Ore Acquisition Inc raised its hostile bid once again to top the friendly offer from steel giant ArcelorMittal.

Nunavut, a special purpose vehicle created for the Baffinland acquisition by the $2-billion private equity firm Energy & Minerals Group, raised its offer to C$1.40 per share for 60 per cent of Baffinland from its earlier offer of C$1.35 a share for 50.1 per cent of the miner's outstanding shares. (See: Nunavut Iron Ore raises bidding war for Baffinland with ArcelorMittal) 

Nunavut is also offering a warrant component for those shareholders who cannot immediately tender their shares but hold on to it for future value once Baffinland's iron ore deposit is developed. However this component of the offer is subject to approvals from regulators.

Nunavut, which already owns about 10 per cent of Baffinland shares, said that it has extended its increased offer until 10 January 2011.

Nunavut's chairman Bruce Walter said that after talking and soliciting the views of Baffinland shareholders, "This increased offer, and our new proposals for Baffinland, address shareholder suggestions and make our offer even more attractive while preserving appropriate flexibility.  Our increased offer will provide Baffinland shareholders superior value to the ArcelorMittal offer of $1.25 per share."

ArcelorMittal, the world's largest producer of steel, had last week amended its November offer of C$1.10 a share to C$1.25 a share, valuing the Toronto-based miner at C$492 million, which is less than Nunavut's yesterday offer of A$550 million. (See: ArcelorMittal raises bid for Canada's iron ore miner Baffinland to C$492 million) 
 
The Luxembourg-based steel giant had also lowered the minimum acceptance condition in its amended offer to 50 per cent plus one common share and increased the break fee from the earlier C$11 million to C$15.5 million.