Nunavut Iron Ore said on Sunday it would ask regulators for an urgent hearing to block a new shareholder rights plan announced by its hostile takeover target Baffinland Iron Mines.
The board of Baffinland, which holds a vast iron ore deposit in the Canadian Arctic, has embraced a friendly, C$1.25-a-share offer ($1.23) from ArcelorMittal the world's largest steelmaker. The Luxembourg-based steelmaker raised its bid from C$1.10 a share on Saturday.
Nunavut Iron Ore Acquisition Inc, backed by a U.S. private equity group, responded in a statement on Sunday, saying the ArcelorMittal offer was still inferior to its own C$1.35-a-share proposal.
On Thursday, Nunavut raised its offer by 69 percent. Based on 345.9 million shares outstanding on Dec. 14, Nunavut's sweetened offer values Baffinland at C$467 million. Nunavut is owned by U.S. based-Iron Ore Holdings LP, was formed in August specifically for the purpose of bidding on Baffinland. Both Nunavut and its parent are backed by the Energy and Minerals Group, a private equity investor,
In asking the Ontario Securities Commission for a hearing on Monday, Nunavut said it would argue that the Baffinland rights plan and an increased break-up fee to be paid to Arcelor were designed to deny shareholders the right to choose.
"This action is particularly offensive for shareholders when it is clear many in the market have indicated that Nunavut Iron's offer already delivers greater value than the modest increase to its offer proposed by ArcelorMittal," Bruce Walter, chairman of Nunavut Iron, said in a statement.
Baffinland, is looking for a partner to allow it to develop its Mary River project in the remote territory of Nunavut. The deposit, located on Baffin Island, holds enough ore to supply all of Europe. But it would cost an estimated C$4 billion to develop the operation, more than Baffinland could bear on its own.
ArcelorMittal insists its rival's bid is not actually worth more to investors. The steelmaker is bidding for the entire company, with a mininum condition of 50 percent acceptance, plus one share.
By contrast, Nunavut is bidding for only 50.1 percent, a percentage it cut from 66.67 percent on Thursday.
It may have difficulty even reaching the less ambitious target as holders for at least 25.5 percent of Baffinland's stock are in lock-up agreements to tender to Arcelor.
On Friday, Baffinland's shares closed at C$1.32 on the Toronto Stock Exchange. The stock was trading for as little as 35 Canadian cents a share on July 21.
ArcelorMittal is looking to expand its own production of iron ore as major suppliers such as Vale, Rio Tinto and BHP Billiton, move to quarterly from annual contracts and pump up prices.
Nunavut said in a statement that its offer remains "superior" to the amended ArcelorMittal offer and that Baffinland's new poison pill and larger break fee are designed to eliminate shareholders' right to choose.