U.S. company Cliffs Natural Resources Inc. has signed a deal to buy Consolidated Thompson Iron Mines Ltd. for $4.9 billion.
“The acquisition of Consolidated Thompson will combine a low-operating risk profile with access to high-growth global markets and broaden our exposure to seaborne iron ore prices,” said Joseph Carrabba, Cliffs’ chairman, president and chief executive.
“We have followed Consolidated Thompson closely since its founding in 2006, and have been very impressed with its significant progress and development to date.”
Brian Tobin, executive chairman, president and chief executive of Consolidated Thompson, called the deal very attractive for shareholders.
“We are delighted that a company of the financial and technical strength of Cliffs, with considerable nearby infrastructure and experience in the Labrador Trough, is going to take our world-class mine and projects to the next stage,” Tobin, a former premier of Newfoundland and Labrador, said in a statement.
Cliffs is offering $17.25 per share in cash in a friendly deal for the Toronto-based iron ore producer. Consolidated Thompson shares closed up 16 cents at $13.38 on the Toronto Stock Exchange on Tuesday.
The deal will require approval by two-thirds of Consolidated Thompson’s shareholders.
In addition to Consolidated Thompson’s directors and senior executives, Cliffs says it has signed a support agreement with the company’s largest shareholder, Wuhan Iron and Steel of China. The Chinese company owns a nearly 19 per cent stake in Consolidated Thompson.
Consolidated Thompson manages and operates the Bloom Lake open-pit iron ore mine in northern Quebec and two adjacent development properties.
The operations are close to Cliffs’ existing operations at Wabush Mines in Eastern Canada.
Cliffs estimated the deal could generate US$75 million a year in pre-tax operating synergies in part by lowering Consolidated Thompson’s freight and ship loading costs.
Cliffs is a major producer of iron ore and metallurgical coal, which is used
in the production of steel.
The company has six iron ore mines and six coal mines in North America as well as two iron ore mining complexes in Western Australia and a 45 per cent economic interest in a coking and thermal coal mine in Queensland, Australia.
Cliffs also has a 30 per cent interest in the Amapa iron ore project in Brazil.
Demand for iron ore, used in the production of steel, has returned since the recession and the emerging economies of India and China have swung back into high gear.
The deal for Consolidated Thompson comes as ArcelorMittal and a private equity fund fight over Baffinland Iron Mines Corp. and its massive Mary River project in Nunavut.