ArcelorMittal Announces Recommended All Cash Offer to Acquire Baffinland

ArcelorMittal has entered into a support agreement with Baffinland Iron Mines Corporation. (Photo: ArcelorMittal)

ArcelorMittal has entered into a support agreement with Baffinland Iron Mines Corporation. (Photo: ArcelorMittal)

ArcelorMittal S.A. ("ArcelorMittal"), the world’s leading steel company, announced today that it has entered into a support agreement with Baffinland Iron Mines Corporation ("Baffinland") pursuant to which ArcelorMittal has agreed to make an offer to acquire (the "Offer") all of Baffinland’s issued and outstanding common shares (the "Common Shares") and all outstanding common share purchase warrants governed by the warrant indenture dated 31 January 2007 (the "2007 Warrants") by way of a take-over bid.

Under the Offer, holders of Common Shares will receive C$1.10 in cash per Common Share, and holders of 2007 Warrants will receive C$0.10 in cash per 2007 Warrant. The Offer, which values Baffinland’s equity at C$433 million on a fully-diluted basis, represents a premium of 15.8% to Baffinland’s closing share price of C$0.95 on the Toronto Stock Exchange (the “TSX”) on 5 November 2010 and a premium of 86.4% to Baffinland’s volume weighted average price of C$0.59 on the TSX for the 20 trading days prior to the announcement of the unsolicited bid for Baffinland by Nunavut Iron Ore Acquisition Inc. on 22 September 2010.

The board of directors of Baffinland has approved the Offer and unanimously recommends that Baffinland’s shareholders and the holders of 2007 Warrants tender their Common Shares and 2007 Warrants to the Offer. In addition, each of the directors and officers of Baffinland has agreed to tender all Common Shares and 2007 Warrants held by them to the Offer pursuant to lock-up agreements with ArcelorMittal. Baffinland’s largest shareholder, Resource Capital Funds, has also entered into a lock-up agreement with ArcelorMittal pursuant to which it has agreed to tender all of its Common Shares and 2007 Warrants, representing approximately 23% of the outstanding Common Shares, to the Offer. The Support Agreement includes a non-solicitation covenant, a right by ArcelorMittal to match any unsolicited superior proposal and payment by Baffinland to ArcelorMittal of a break fee of C$11 million in certain circumstances.

Baffinland is a Canadian junior mining company focused on the exploration and development of the iron ore deposits located on its 100%-owned Mary River property. The property has 365 million tonnes of proven and probable reserves grading 64.7% iron and 500 million tonnes of additional resources (52 million tonnes of measured and indicated resource grading 64.6% iron and 448 million tonnes of inferred resource grading 65.5% iron) as reported by Baffinland.

Aditya Mittal, Chief Financial Officer and Member of the Group Management Board of ArcelorMittal said:
"The Offer is in line with ArcelorMittal’s strategy of expanding its mining portfolio and selectively adding to its existing pipeline of high quality development projects. ArcelorMittal already has a significant iron ore presence in Canada through ArcelorMittal Mines Canada and has the technical and project management expertise to develop the Mary River property."

Full details of the Offer will be included in a take-over bid circular which is expected to be mailed to holders of Common Shares and holders of 2007 Warrants by 16 November 2010. The Offer will be open for acceptance for a period of not less than 35 days and is subject to a number of customary conditions, including: (i) there being deposited under the Offer and not withdrawn at the expiry time of the Offer such number of Baffinland Common Shares that represent at least 662/3% of the Common Shares calculated on a fully-diluted basis, and (ii) the receipt of all necessary regulatory approvals.

ArcelorMittal’s financial advisor is RBC Capital Markets and its legal counsel is Ogilvy Renault LLP.