TORONTO — ArcelorMittal has signed a deal to increase its friendly takeover offer for Baffinland Iron Mines Corp (TSX:BIM) to $1.25 per share, up from an offer of $1.10.
The increased offer, worth about $492 million, comes in the face of a hostile offer by Nunavut Iron Ore Acquisition Inc., a subsidiary of the private equity investor Energy & Minerals Group, of $1.35 per share.
However, the Nunavut offer is for only 50.1 per cent of Baffinland’s outstanding shares, including those it already holds.
Nunavut held about a nine per cent stake in the company as of last week.
ArcelorMittal’s offer, which also includes 10 cents per warrant, is for all of Baffinland’s shares.
Baffinland shares closed up four cents at $1.32 on the Toronto Stock Exchange on Friday.
In connection with the revised offer announced late Saturday, the Baffinland board has approved the adoption of a new shareholder rights plan.
The Ontario Securities commission had struck down an earlier shareholder rights plan.
Under an amended support agreement, ArcelorMittal, the world’s biggest steel company and owner of the former Hamilton-based Dofasco, has agreed to increase the break fee from $11 million to $15.5 million and may waive the minimum tender condition of 50 per cent of Baffinland’s shares to 45 per cent.
Demand for iron ore, used in the production of steel, has returned since the recession, which affected demand for everything from new buildings and vehicles to appliances.
Luxembourg-based Arcelor has been building up its iron ore reserves as it seeks to protect itself against price increases in the metal.
The world’s three biggest iron ore suppliers earlier this year decided to price their contracts on a quarterly basis rather than an annual one, making steel producers more vulnerable to sudden prices changes.
Baffinland has been trying to secure $4.1 billion in financing to develop the Mary River property on Baffin Island, 1,000 kilometres northwest of Nunavut’s capital of Iqaluit. Baffinland has proposed an 18 million tonne per year iron ore mine at the location.