The former chief executive of Baffinland Iron Mines Corp. is asking the Ontario Securities Commission to block a takeover bid for the company by ArcelorMittal and a private equity fund.
Gord McCreary, who is trying to put together a rival offer involving an unidentified Chinese bidder, wants the Ontario regulator to investigate the joint bid by the world's largest steel maker and Nunavut Iron Ore Acquisition.
In a letter to the OSC, Mr. McCreary noted public information with respect to the offer and the relationship between ArcelorMittal and Nunavut Iron was not available.
“But it would appear that the offerors have come to an agreement for the sole purpose of purchasing the securities of Baffinland without further price escalation,” Mr. McCreary wrote.
“The sharing and exchanging of information by ArcelorMittal and Nunavut Iron in connection with the preparation of the offer may be in contravention of the various lock-up, support and confidentiality agreements in place between ArcelorMittal, Nunavut Iron, Baffinland and various third parties.”
A spokeswoman for the OSC said the commission doesn't comment on correspondence it receives.
ArcelorMittal and Nunavut Iron had been bidding against each other for Baffinland before they called a truce and made their joint offer for the company and its massive Mary River iron ore project.
The board at Baffinland backed the proposal after it was assured that Nunavut Iron would be responsible for its share of the purchase costs and development of the Mary River project.
The proposal would see ArcelorMittal own 70 per cent of Baffinland and Nunavut Iron, which currently holds 10 per cent, increase its stake to 30 per cent.
Nunavut Iron spokesman Bruce Walter said in an e-mail that “we are confident that our offer complies with all applicable laws and that it will be proceeding on schedule ”
ArcelorMittal's spokesman Peter Block said the joint bid is in the best interests of all shareholders.
“Nunavut is receiving no special treatment and will be responsible for bearing its pro rata share of the purchase price and all costs associated with the joint offer, and the development of the Mary River project,” Mr. Block said in an e-mail.
The joint bid is worth $1.50 per Baffinland share and values the company at about $590-million. The offer, which requires that at least two-thirds of Baffinland shareholders tender their shares, expires at midnight on Monday night.
Mr. McCreary, who stepped down from the Baffinland board in November after ArcelorMittal's friendly deal was first announced, has called the joint offer far too low.
ArcelorMittal has been building up its iron ore reserves as it seeks to protect itself against price increases.
Demand for iron ore, used in the production of steel, has returned since the end of the recession and the emerging economies of India and China have swung back into high gear.