Toronto, Jan 01 (Agencies): Toronto-based Baffinland Iron Mines Corp on Friday asked its shareholders to accept ArcelorMittal's higher offer of $1.40 a share or $550.7 million. The world's biggest steel company raised its offer from $1.25 to $1.40 to beat rival Nunavat Iron Ore Acquisition Inc's $1.35.

ArcelorMittal raised its bid after the deadline for its previous offer of $1.25 or $492 million passed on Thursday mid-night.The Luxembourg-based company has set the deadline of January 10 for its new offer.

Rival Nunavat, which already owns 10 percent stake in Baffinland, is seeking to control another 50 percent stake in Baffinland.

Reacting to the new offer, Baffinland board of directors recommended it to its shareholders on the grounds that rival Nunavut's offer is only for partial ownership, and could have an adverse effect on the outstanding publicly traded shares.

The hiked ArcelorMittal offer "is both transparent and compelling to shareholders,'' said Daniella Dimitrov, vice chairman of Baffinland.

"The ArcelorMittal offer represents a 27 percent premium to its initial offer and an increase in consideration to all shareholders of 75 percent since this process started in September with an unsolicited offer of $0.80 per share.

"The Baffinland board of directors unanimously recommends that Baffinland shareholders and 2007 Warrant holders tender their shares to the increased ArcelorMittal Offer,'' he said.

ArcelorMittal mining head Peter Kukielski said, ""Our offer ensures shareholders receive 100 per cent cash for all of their shares, rather than cash for just some shares and diluted value for the shares not taken up under the Nunavut offer.''

Both ArcelorMittal and Nunavat are eying Toronto-based Baffinland because of its huge 365 million tonnes of iron ore reserves at its Mary River project in far northern reaches of Canada.

It is estimated that the Mary River project can produce 18 million tonnes of iron ore annually for up to two decades.