Nunavut Iron challenges Baffinland plan

The Ontario Securities Commission will hear Wednesday a challenge to a shareholder rights plan at Baffinland Iron Mines Corp. by a private equity investor seeking to acquire a controlling stake in the company.

The regulator said it will hear a request for a temporary ban on the plan on Wednesday, while a second hearing will be held on Jan. 6 for a permanent cease trade order for the plan.

The challenge by Nunavut Iron Ore Acquisition Inc. follows a move by ArcelorMittal to increase its friendly takeover offer for Baffinland to $1.25 per share, up from an earlier offer of $1.10.

The new bid values the company at about $492 million.

Nunavut Iron, a subsidiary of the Energy & Minerals Group, has offered $1.35 per share, but has limited its offer to only the number of shares needed to increase its stake to 50.1 per cent of the company.

ArcelorMittal's offer is for all of Baffinland's outstanding shares.

Baffinland shares were up a penny at $1.32 on the Toronto Stock Exchange on Tuesday.

The Ontario Securities commission has already struck down an earlier Baffinland shareholder rights plan.

Under an amended support agreement ArcelorMittal, the world's biggest steel company and owner of the former Hamilton-based Dofasco, would get a larger break fee of $15.5 million, up from $11 million, and can waive its minimum tender condition of 50 per cent of Baffinland's shares down to 45 per cent.

The bidding war between ArcelorMittal and Nunavut Iron has more than doubled the price of Baffinland shares in the last two months.

Baffinland is trying to raise money to develop its Mary River property on Baffin Island, near Pond Inlet, Nunavut. It proposes to develop an iron ore mine that would produce 18 million tonnes per year.