OSC moves to block Baffinland Iron bid

The Ontario Securities Commission is looking to block a hostile takeover bid for Toronto-based Baffinland Iron Mines Corp.

The regulator will hear a request Thursday by commission staff to cease trade in any shares tendered to the offer by Nunavut Iron Ore Acquisition Inc.

"The purpose of the hearing is to address staff's concerns about Nunavut Iron Ore Acquisition Inc.'s ability to take up shares of Baffinland Iron Mines Corp., in compliance with Ontario's securities laws," OSC spokeswoman Wendy Dey wrote in an email.

Nunavut Iron has offered $1.45 per share for Baffinland, while ArcelorMittal, the world's largest steel company, has offered $1.40 per share in a friendly deal.

However, ArcelorMittal is seeking all of Baffinland's shares, while Nunavut Iron only wants to increase its stake in the company to 60 per cent from about 10 per cent.

Shares in Baffinland Iron Mines were down a penny at $1.44 on the Toronto Stock Exchange on Wednesday. 

Baffinland said it continues to support the ArcelorMittal offer, but declined further comment.

Nunavut Iron said a hearing will be an opportunity for both sides to voice complaints, but also declined to comment.

Project rich in iron ore

The two suitors are fighting to gain control of Baffinland's Mary River project on northern Baffin Island, which contains 865 million of tonnes of iron ore.

The company wants to build a mine about 1,000 kilometres northwest of Iqaluit.

The Nunavut Iron offer values Baffinland at about $570 million, while the ArcelorMittal offer is worth about $550 million.

Nunavut Iron, a subsidiary of private-equity fund Energy & Minerals Group, had originally offered 80 cents cash per share, but increased its bid to $1.45 per share late last week.

The directors and senior executives of Baffinland, as well as the company's largest shareholder, Resource Capital Funds, have entered into agreements with ArcelorMittal to tender their shares and warrants. Resource Capital Funds currently owns 23 per cent. 

ArcelorMittal, the world's largest steel producer, has been building up its iron ore reserves as it seeks to protect itself against price increases.

The world's three biggest iron ore suppliers earlier this year decided to price their contracts on a quarterly basis rather than an annual one, making steel producers more vulnerable to sudden price changes.