Rio Tinto's Bid for Labrador Iron Ore Royalty Income Fund

Rio Tinto plc announced its intention on December 14, 2000 to make an offer for all of the units of Labrador Iron Ore Royalty Income Fund at $13.50 per unit. Rio Tinto holds a 56 per cent equity interest in Iron Ore Company of Canada, from which the fund receives a royalty on iron ore sales and in which the fund holds a 19 per cent equity interest. The offer was formally mailed to unit-holders on March 8, 2001 after Rio Tinto was provided the independent valuation of the fund prepared by CIBC World Markets Inc. Prior to the announcement of Rio Tinto’s offer, the units were trading at $11.50. CIBC valued the units in the range of $18 to $24.70 per unit. The fund’s trustees recommended that unit-holders reject the offer. Rio Tinto’s offer was increased on March 29, 2001 in effect to $14.50 by offering $14.25 per unit and not making any deduction for the $0.25 dividend declared by the trustees on March 14, 2001. The trustees continued to recommend that unit-holders reject the offer and just prior to the scheduled expiry of the offer, declared distributions of $0.375 for each of the second, third and fourth quarters of 2001. Rio Tinto acquired more than 20 per cent of the fund’s units at an aggregate acquisition cost of approximately $86.6 million.

Rio Tinto was represented by Osler, Hoskin & Harcourt LLP. The Oslers team was led by John Evans and included Donald Gilchrist and Brian Temins (business law), Jack Silverson (tax) and Peter Franklyn (competition). Graham Gow, Jasprit Gill (corporate), and James Morand (tax) of McCarthy Tétrault acted for the fund. James McCartney, Q.C., of McCarthy Tétrault is a trustee.