ArcelorMittal gains Baffinland control

Shareholders of Baffinland Iron Mines Corp. hoping for a better price from ArcelorMittal and its private equity partner appeared to be out of luck Friday.

The world's largest steel maker and Nunavut Iron Ore Acquisition Inc. said they had increased their stake to 68 per cent, above a key threshold sought by the pair ahead of a midnight Friday night deadline for their offer of $1.50 per share.

Jennings Capital analyst Peter Campbell said a pocket of minority shareholders could continue to hold on to their shares, but ArcelorMittal now has effective control of the company.

"My expectation is that ArcelorMittal will basically close this transaction just to get it into the books and then basically keep the offer open so anybody at any time can tender their shares to ArcelorMittal for $1.50," Campbell said.

Baffinland shares were unchanged at $1.49 per share on the Toronto Stock Exchange on Friday as more than three million shares traded hands.

ArcelorMittal and Nunavut Iron said that they had taken-up an additional 8.3 million Baffinland shares.

The companies also said they planned a subsequent acquisition transaction to try and acquire the remaining shares that are not tendered to their offer, but warned shareholders who tender by the deadline would receive their money first.

'My expectation is that ArcelorMittal will basically close this transaction Jennings Capital analyst Peter Campbell

"While their common shares and 2007 warrants will be acquired at the same price as paid under the offer, payment will not be made until after completion of that transaction," the companies said of shareholders who do not tender.

ArcelorMittal and Nunavut Iron, had been in a bidding war for Baffinland and its large Mary River iron ore project on Baffin Island, but called a truce to make a joint offer that valued the company about $590 million.

The two companies, who have agreed to split Baffinland 70-30, with ArcelorMittal holding the largest stake, have already started to make changes at Baffinland.

Last week, Baffinland revamped its board and named Phil Du Toit, the ArcelorMittal executive vice-president in charge of mining projects and exploration, as Baffinland's new president and chief executive.

Five directors also left the Baffinland board, which was expanded to 11 directors.

Aditya Mittal, ArcelorMittal's chief financial officer, was named chairman. Campbell said the move made perfect sense.

"Once you buy an asset and have demonstrated control, it makes perfect sense to put your people in there to advance the project according to your timetable," he said.