Rival bidders join forces to take over key iron ore deposit in Canadian Arctic
Baffinland's Mary River will produce enough high-grade iron ore to supply all of Europe for years, and could displace other dominant producers because of its location.
Fri, Jan 14, 2011 at 12:48 PM
IRON ORE: ArcelorMittal, the world's largest steelmaker, will own 70 percent of Baffinland, and Nunavut Iron will own 30 percent. (Photo: Sean Gallup/Getty Images)
TORONTO/BRUSSELS - Two rival bidders for Baffinland Iron Mines have united in a $595 million joint takeover offer for the iron ore explorer, ending a four-month fight to control its huge deposit in the Canadian Arctic.
ArcelorMittal, the world's largest steelmaker, and Nunavut Iron, backed by U.S. private equity, on Friday made a joint C$1.50 a share offer for 100 percent of Baffinland.
Under the agreement, ArcelorMittal and Nunavut Iron will own 70 percent and 30 percent of Baffinland respectively, Luxembourg-based ArcelorMittal said in a statement.
"The respective parties were killing themselves without end-game in sight, and so both parties very much wanted the asset and this is a splitting of the spoils so to speak," said a source with direct knowledge of the offers.
The battle for Baffinland's Mary River project has underscored the intensifying global race for resources as China, India and other emerging countries build roads, bridges and housing to meet the needs of their growing and more affluent populations.
Mary River, in the remote Canadian Arctic, will produce enough high-grade iron ore to supply all of Europe for years, and is seen displacing other dominant producers due to its proximity and ocean access to the continent.
Less dependence for Arcelor
The joint offer from Nunavut, backed by the Energy and Minerals Group, and ArcelorMittal ends a fight between the two companies that began in September. Previously Nunavut was offering C$1.45 per share for 60 percent of Baffinland, and Arcelor was bidding C$1.40 a share for the entire company.
Once the mine goes into production, Arcelor will be less dependent on dominant producers like BHP Billiton and Vale SA, which have long held much of the supply of iron ore, the component of steel.
The cost of developing the project, estimated at as much as C$4 billion, will dwarf the acquisition price and comes at a time when iron ore prices are at near-record highs.
Production at Mary River would not begin until at least 2013, Baffinland said on Thursday.
The joint offer, filed under ArcelorMittal's banner and is open until 11:59 p.m. on January 24.
It's subject to the condition that at least 66 2/3 percent of the common shares are tendered to the bid, calculated on the fully diluted basis.
Nunavut Iron and its affiliates hold about 10.3 percent of Baffinland's shares, while ArcelorMittal has lock-up agreements with Baffinland's largest shareholder, Resource Capital Funds, which holds about 22.5 percent of the stock.
Directors and officers of Baffinland have also agreed to tender their shares, representing 2.4 percent.
Baffinland shares were down slightly at C$1.51 on the Toronto Stock Exchange.
(Additional reporting by Julie Gordon; Editing by Frank McGurty)
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