Texas-backed two-step

Bruce Walter looked outgunned in the bidding for Baffinland Iron Mines. But then he brought up partnership
By Robert Thompson

Insider: Bruce Walter

Who: Chairman, Nunavut Iron Ore Acquisition Inc.

Involvement: Bruce Walter is one of Canada’s great dealmakers. He’s worked as a lawyer on mergers and acquisitions, headed up senior banking groups at BMO, and worked with Ian Delaney to take over Sherritt International. Walter’s latest play saw him partner with former Sherritt CEO Jowdat Waheed last year to create Nunavut Iron Ore, a company designed for the unsolicited takeover of Baffinland Iron Mines (TSX:BIM) and its massive, but challenging, Mary River project. A bidding war with steelmaker ArcelorMittal reached an unusual outcome in January—when Nunavut and Arcelor bought Baffinland in a 30%-70% joint bid. More than 90% of Baffinland shares were tendered in February, with a final shareholder vote planned for late March.

Listed: Was Nunavut Iron Ore Acquisition Inc. created just to make a play for Baffinland?

Bruce Walter:  Yes, the entity was created specifically for this. We have a partnership with the Energy and Minerals Group out of Houston [a $2-billion private equity firm], and we intend and expect a longer-term relationship with lots of deals. But we came together specifically for Baffinland. I’d known John Calvert, managing partner at Energy and Minerals, for over a decade. They were the logical people to speak to when we found an opportunity.

Listed: Why target Baffinland?

Bruce Walter: It is important to understand what you can and can’t do. The skill set that we have is very well suited to raising financing and dealing with complex development projects.We have tackled them before.Where Baffinland was concerned, we saw a very good asset sitting in a company that the market had lost confidence in and where the company appeared to be unable to move the project forward. Those were issues we felt we could solve. It didn’t take us too long to convince our partners at Energy and Minerals Group that we could unlock a lot of value moving forward. That was really the genesis of the opportunity.

Listed: That said, the takeover was complicated, especially when you ended up in a battle for control with ArcelorMittal.

Bruce Walter: What was visible to the public was a fraction of what was actually going on in terms of various possibilities that we explored. There were probably four times as many things going on behind the scenes as what was visible to the public and what was visible was still a pretty complicated deal. In the background it was very complicated and could have gone off the tracks at any number of points in any number of ways.

Listed: Eventually you came together as a joint venture, which is surely an unusual arrangement in mining.

Bruce Walter: It is a bit unusual, but part of successful dealmaking is having the persistence and determination not to take a blockade in front of you as the end of the road, but to look at other ways to proceed. Having gone four or five rounds bashing one another, we both recognized we could achieve our respective economic interests better by working together than continuing to compete. You can’t get emotional about these things. The business community in Canada is small and making enemies is not good business. In this deal we never did anything that would give ArcelorMittal the reason to be unhappy with us other than we were a determined competitor.

Listed: So who first proposed it?

Bruce Walter: We initiated the process. It was immediately received, because necessity dictated it. I think they recognized we can be decent people to work with and likewise we had no animus with the Arcelor people. So when it came to sitting down and deciding whether it was the smartest way to go, it was much easier than if there had been mudslinging along the way.

Listed: Now that the deal is complete, how do you move forward in partnership with Arcelor?

Bruce Walter: We spent an awful lot of time thinking about that because at the end of the day making the investment is just the first step in the process. You still have to figure out how you’re going to profit in the future, which is the critical piece. At this juncture we have a good working relationship with the key people at Arcelor from the top down through their mining group. We’re always building on that relationship. Hopefully it will be a positive working relationship so down the road we can realize value on our investment.

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