ArcelorMittal Increases Its Offer Price for all Common Shares of Baffinland Iron Mines Corporation to C$1.40 per Common Share
- Increased Offer Price of C$1.40 in Cash per Common Share for 100 per cent of the Common Shares-
- Revised Offer Price is a 27% Premium to ArcelorMittal's Original Offer Price and a 150% Premium to the Trading Price of Baffinland Shares prior to Nunavut's Original Offer-
- Approximately 25% of Baffinland Common Shares are Locked-Up to the ArcelorMittal Offer -
- Support Agreement between ArcelorMittal and Baffinland Remains in Place
- Baffinland Shareholders Receive Superior Value and Certainty as Compared to the Revised Coercive Partial Offer from Nunavut
- Offer is Open for Acceptance Until 11:59 p.m. (Toronto Time) on 10 January 2011
Toronto, 31 December 2010 / Luxembourg, 31 December 2010 (14.15 CET) - ArcelorMittal today announced that it has increased its offer (the "Offer") for all outstanding common shares ("Common Shares") of Baffinland Iron Mines Corporation ("Baffinland") and all outstanding common share purchase warrants issued pursuant to a warrant indenture dated 31 January 2007 (the "2007 Warrants") to C$1.40 per Common Share.
The increased all cash offer represents a premium of approximately 27% to ArcelorMittal's original Offer price of C$1.10 per Common Share, and a premium of 150% to the trading price of the Common Shares prior to Nunavut's original unsolicited offer in September 2010.
Peter Kukielski, Head of Mining and Member of the Group Management Board of ArcelorMittal said: "ArcelorMittal's increased Offer of C$1.40 per share for all Common Shares provides demonstrably superior value and certainty for Baffinland shareholders, compared to Nunavut Iron Ore Acquisition Inc.'s revised coercive partial offer. Our Offer ensures shareholders receive 100% cash for all of their shares, rather than cash for just some shares and diluted value for the shares not taken up under the Nunavut offer."
If Nunavut Iron Ore Acquisition Inc.'s ("Nunavut") revised offer were successful, Baffinland shareholders would face the prospect of being left with thinly traded minority Common Shares that would be unlikely to reflect the full value of Baffinland's assets. Furthermore, if Nunavut's partial offer was successful and Baffinland were to issue the approximately 157.4 million warrants contemplated in their partial offer, a substantial overhang would exist, which would lead to significant equity dilution, both of which would likely have a negative impact on the trading value of the remaining minority held Common Shares of Baffinland.
Since Nunavut already owns approximately 10.5% of the Common Shares, it is effectively bidding for only approximately 49.5%, or approximately 55.4% of the 89.5% of Common Shares it does not currently own.
In order for the value of Nunavut's revised coercive partial offer to equal the C$1.40 per Common Share offered by ArcelorMittal's increased Offer (assuming a 55.4% pro rata take-up under Nunavut's offer), the remaining minority held Common Shares would need to trade at C$1.18 per share (which assumes a warrant value of C$0.23 per full warrant using Nunavut's volatility and risk free rate assumptions as set out in its December 29 announcement), which is more than double the C$0.56 trading value of the Common Shares prior to Nunavut's original offer for all of the Common Shares in September 2010. Assuming Common Shares tendered to the Offer under lock-up agreements with ArcelorMittal do not tender and there is a 76.6% take-up under the Nunavut revised coercive partial offer, the remaining minority held Common Shares would need to trade at C$1.06 per share for the value of Nunavut's revised coercive partial offer to equal the C$1.40 per Common Share offered by ArcelorMittal's increased Offer.
Nunavut's revised coercive partial offer leaves Baffinland shareholders uncertain about: -
- how many of their shares will be taken-up due to the pro rationing of tendered shares;
- the price at which shares not taken up by Nunavut would trade should the current partial offer by Nunavut be completed;
- the timing of any amendment to its offer to provide for exchange rights;
- whether warrants would be issued in the future and the value such warrants represent; and
- Nunavut's project development plan for Baffinland.
As previously announced, ArcelorMittal has entered into a lock-up agreement with Baffinland's largest shareholder, Resource Capital Funds ("RCF"), pursuant to which RCF has tendered all of its Common Shares and 2007 Warrants, representing approximately 22.5% of the outstanding Common Shares (on a fully diluted basis), to the Offer. In addition, each of the directors and officers of Baffinland have tendered all Common Shares and 2007 Warrants held by them, representing a further approximately 2.4% of the outstanding Common Shares (on a fully diluted basis), to the Offer pursuant to lock-up agreements with ArcelorMittal. In addition, as at 29 December 2010, no further conditions relating to regulatory approvals are outstanding under the Offer.
The ArcelorMittal Offer remains subject to the same conditions as the original Offer of 12 November 2010 as amended by the Notice of Variation and Extension dated 18 December 2010.
The Support Agreement entered into between ArcelorMittal and Baffinland on November 8, 2010 as amended December 18, 2010, including the non-solicitation covenants and ArcelorMittal's right to match any unsolicited superior proposal, remains in place.
ArcelorMittal has today mailed a notice of variation of the Offer with respect to its increased Offer price of C$1.40 per Common Share for all Common Shares to Baffinland securityholders. The Offer price of C$0.10 per 2007 Warrant remains unchanged. The revised Offer is open for acceptance until 11:59 p.m. (Toronto time) on 10 January 2011, unless further extended or withdrawn.