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Nunavut improves its pitch for Baffinland

Baffinland Iron Mines is developing an iron ore mining operation in the northern part of Baffin Island

Baffinland Iron Mines

Nunavut Iron Ore Acquisition Inc. is fighting until the bitter end in its quest to buy massive iron ore assets in Canada's Far North.

On the same day that steel giant ArcelorMittal's friendly takeover offer for Baffinland Iron Mines Corp. was set to expire, Nunavut, supported by a U.S. private equity group, came back to the table with an amended hostile bid. The move left Baffinland shareholders with just a few hours to contemplate the rival offers before ArcelorMittal's expired at midnight.

"We are looking to appeal to those [shareholders]who might have been sitting on the fence," said Bruce Walter, Nunavut's chairman, in an interview. "Hopefully the additional consideration we've added today will sway those people into our camp."

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The two companies are battling for control of Baffinland's Mary River project. The Baffin Island assets, touted as one of the world's best undeveloped iron ore deposits, are coveted by global steel makers trying to meet rising demand from China and other Asian countries. Before the bidding war erupted, Baffinland said it was structuring a joint venture for the $4-billion project, which the junior miner is unable to develop without outside capital.

On Wednesday, Nunavut - which was formed solely to buy Baffinland - upped its offer to $1.40 a share for 60 per cent of Baffinland, up from $1.35 a share for 50.1 per cent of the company. Because Nunavut already owns approximately 10 per cent of Baffinland shares, the new offer is worth about $273-million in cash.

Nunavut is also offering warrants to shareholders who cannot immediately tender their shares, to allow them to profit from future enhanced value once the massive iron ore deposit is developed.

ArcelorMittal, meanwhile, stood firm with its offer of $1.25 a share in cash for the entire company, totalling $492-million. The Luxembourg-based company refused to extend its Dec. 29 expiry date even though Nunavut's was pushed to Jan. 10. If shares tendered to its bid do not meet the 50 per cent plus one threshold, however, it could come back with a new bid.

The ArcelorMittal offer already has the blessings of Baffinland's board of directors and Resource Capital Funds, Baffinland's largest shareholder. In total, about 25 per cent of Baffinland's shareholders have entered into lock-up agreements in support of ArcelorMittal's bid.

Last week, the Ontario Securities Commission held a last-minute hearing to strike down a shareholders' rights plan implemented by Baffinland's board of directors. Had that meeting been delayed, both bids likely would have been extended into 2011.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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