A takeover fight for Canada's Baffinland Iron Mines Corp. (BIM.T, BIMGF) between international steel giant ArcelorMittal (MT, MT.AE) and shareholder group Nunavut Iron Ore Acquisition Inc. ended Friday after the two agreed to come together in a sweetened joint bid.

It may not, however, be the last chapter in the story, as Baffinland Chief Executive and Chairman Richard McCloskey said he doesn't support the new, joint bid because he believes it is unfair to the company's other shareholders.

ArcelorMittal, the world's largest steel producer, said Nunavut Iron will join it in an all-cash bid for Baffinland at C$1.50 a share, which analysts said values the company at C$590 million (US$596 million). ArcelorMittal would own 70% of Baffinland and Nunavut Iron would get a 30% stake. Nunavut Iron is an entity controlled by Houston private-equity firm the Energy & Minerals Group, which owns 10.3% of Baffinland's shares.

"Together with Nunavut Iron, we are providing a more attractive offer to Baffinland shareholders than either of us were prepared to provide on our own," said Peter Kukielski, head of mining at ArcelorMittal.

But Baffinland's McCloskey said it is unfair that Nunavut Iron will get a 30% ownership stake in the project, while other shareholders will get just cash for their shares.

"The number one responsibility for a director is to make sure that all shareholders are treated equally--and in this case they're not, in my opinion," McCloskey said.

Baffinland has five days to review the new offer. McCloskey is one of eight directors, and said he wasn't sure how the other directors would feel about the new offer, or what ultimate decision Baffinland would make.

The new, joint bid is up from the C$1.40 a share ArcelorMittal last offered, and well above the 80 Canadian cents a share Nunavut Iron offered for Baffinland when the bidding began in September.

Baffinland stoked the interest of several international mining companies early last year when it said it was looking for a partner to develop its C$4 billion Mary River iron-ore project, considered to be one of the best undeveloped iron-ore mines in the world, and expected to produce 18 million tons a year over 21 years.

ArcelorMittal's latest offer is its fourth as it engaged in back-and-forth bidding with Nunavut Iron. Before reaching an agreement with ArcelorMittal, Nunavut Iron had upped its hostile partial offer for 60% of Baffinland's shares to C$1.45 each, plus warrants for the remaining holders.

Baffinland's board had entered an agreement to support ArcelorMittal's individual bid, and had agreed to tender their shares representing a 2.4% stake. Resource Capital Funds, Baffinland's largest shareholder with a 22.5% stake, also agreed to support ArcelorMittal's bid.

Bruce Walter, the chairman of Nunavut Iron Ore, said he believed that Baffinland's board would still be bound under that agreement with ArcelorMittal to support the new joint bid. But McCloskey said he believed the fiduciary duty of directors not to support an unfair deal had more legal weight than the support agreement.

The new joint bid expires Jan. 24, and two-thirds of shareholders must vote in favor for the deal to be approved.

Shares of Baffinland recently traded on the Toronto Stock Exchange at C$1.55 each, up 3 Canadian cents.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; edward.welsch@dowjones.com.
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