ArcelorMittal says it won’t extend Canadian takeover offer

TORONTO - ArcelorMittal said Wednesday it is not interested in extending its Dec 29 deadline for friendly takeover of Canadian iron ore company Baffinland Iron Mines after the steel giant came to know that Canadian regulators won’t be able to decide a legal challenge to the deal by a hostile bidder.

The hostile bidder Nunavat Iron Ore had moved the regulator Ontario Securities Commission (OSC) Sunday to challenge Baffinland shareholders’ anti-takeover plan.

Baffinland’s anti-takeover plan was initiated last week to stave off Nunavat’s hostile bid for what is described as the world’s “best underdeveloped iron ore reserve.”

Baffinland shareholders favour ArcelorMittal over Nunavut because Nunavat’s senior executive Jowdat Waheed worked for it (Baffinland) just before launching the hostile bid. Baffinland accuses Waheed of breaking confidentiality agreements.

After their first shareholder rights plan - also called a poison pill - last month to stave off Nunavat was scrapped by the regulators, Baffinland announced a new shareholder rights plan over the weekend to end the auction after signing a new agreement to back ArcelorMittal’s $492-million bid. But the hostile bidder Nunavat challenged the new poison pill before the Ontario Securities Commission Sunday, arguing that it is stopping Baffinland share holders from choosing the best bidder. But when ArcelorMittal came to know Wednesday that the regulators will not be able to decide on the challenge till January, it asked Baffinland to drop its poison pill.

A poison pill or shareholder rights plan allows a targeted company to stop hostile takeover by issuing a flood of new shares so that the bidder is unable to pay for them.

As a result of ArcelorMittal’s decision to ask Baffinland to waive its poison pill before its deadline of December 29, hostile bidder Nunavat also dropped its challenge.

As matters stand today, ArcelorMittal’s all-cash offer of $1.25 a share or $492 million will expire December 29.

Nunavut’s offer of $1.35 a share for 50.1 percent of Baffinland shares expires December 30. Nunavut, which is backed by a US private equity group, already owns 10 percent shares in Baffinland. It remains to be seen who else enters the fray till the friendly deal with ArcelorMittal expires December 29.

Reports say Baffinland’s former CEO Gordon McCreary, who owns a 2.4 percent stake in the company and opposes any deal with ArcelorMIttal or Nunavat, is trying to line up an unnamed Chinese state-owned company to bid before December 29.

ArcelorMittal struck the deal with Baffinland in November to acquire its estimated 365 million tonnes of iron ore reserves at the Mary River project.

The project could produce 18 million tonnes of iron ore annually for up to two decades for ArcelorMittal.

According to investment bank Jennings Capital Inc., the Mary River project as “possibly the best undeveloped iron ore deposit in the world.” If ArcelorMittal succeeds to acquiring Baffinland, it will have to shell out $4 billion to bring the Mary River project on stream.

(Gurmukh Singh can be contacted at gurmukh.s@ians.in)