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: