ENTREPRISES & STRATÉGIES — Industrie

ArcelorMittal offer is a bid for 100% of Baffinland’s shares and is financially superior to Nunavut’s coercive partial offer



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(Photo: ArcelorMittal)

- ArcelorMittal’s cash offer of C$1.25 per common share for 100% of Baffinland’s common shares is financially superior to nunavut’s coercive partial bid
- The value of the partial offer by Nunavut is highly uncertain
- Baffinland’s new shareholder rights plan protects shareholders from Nunavut’s financially inferior, coercive bid

ArcelorMittal today responded to Nunavut Iron Ore Acquisition Inc.’s (“Nunavut”) recent allegations regarding ArcelorMittal’s improved, financially superior offer for Baffinland Iron Mines Corporation (“Baffinland”). ArcelorMittal’s improved offer of C$1.25 in cash per common share (the “ArcelorMittal Offer”) provides superior value and certainty for the shareholders of Baffinland. The ArcelorMittal Offer is made for 100% of Baffinland’s shares as compared to Nunavut’s offer, which is a coercive partial bid for only 50.1% of Baffinland’s common shares including those shares already owned by Nunavut.

The current offer by Nunavut is coercive because it forces Baffinland shareholders to decide whether to accept or reject such offer without knowing the price at which the shares not taken up would trade should the current offer by Nunavut be completed. Nunavut’s offer leaves shareholders with the prospect of being left with thinly traded minority common shares that would unlikely reflect the full value of Baffinland’s assets. In addition, Nunavut’s offer provides Baffinland’s shareholders with no certainty as to how many shares will be taken-up due to the pro rationing of tendered shares. Further, the fact that Nunavut already owns approximately 10.3% of the common shares means it is effectively bidding for only approximately 39.8%.

Assuming all of Baffinland’s common shares, other than those locked-up with ArcelorMittal and those owned by Nunavut, are tendered to Nunavut’s offer, Baffinland’s shareholders would receive C$1.35 in cash for approximately 62% of their holdings and would end up continuing to hold the remaining 38% of their tendered shares. For Baffinland shareholders to realize the equivalent value offered by the C$1.25 ArcelorMittal Offer, the remaining minority common shares held by tendering shareholders would have to trade at or above C$1.09 per share, versus an unaffected price for Baffinland’s common shares of C$0.56 prior to the initial unsolicited offer by Nunavut on 22 September 2010.

The economic value of the coercive partial offer by Nunavut is substantially less than the ArcelorMittal Offer and is highly uncertain as it is dependent on an unspecified royalty structure and project development plan.

Under the current offer by Nunavut, Baffinland shareholders face continued execution and financing risk with the potential for significant equity dilution. If the Nunavut offer were successful, these risks could materially and adversely affect the value of the remaining minority common shares.

Baffinland has agreed to adopt a new shareholder rights plan in order to protect Baffinland’s shareholders from being coerced into tendering into Nunavut’s inferior partial offer and in order to guard against tactics by Nunavut that seek to coerce shareholders. Adopting a new rights plan ensures that Baffinland shareholders can take advantage of the superior ArcelorMittal Offer.

The increased break fee payable under the ArcelorMittal Offer reflects Baffinland’s board of directors’ support for the certainty and value that the ArcelorMittal Offer provides to Baffinland shareholders. ArcelorMittal’s Offer for all common shares represents an increase of $0.15 per share, or almost $60 million, more than its original bid.

ArcelorMittal has received all of the required regulatory approvals for its offer and is uniquely positioned to provide the technical expertise and financial capacity to evaluate, manage and overcome the infrastructure challenges associated with the Mary River project, a project vital to Baffinland’s future success.