Inco ready to open talks with Teck Cominco

Wednesday, August 9th 2006

Canadian nickel miner Inco Ltd. , which plans to be acquired by Phelps Dodge Corp. , said on Monday it would open negotiations with unsolicited suitor Teck Cominco Ltd.

Inco urged shareholders to reject Teck’s existing takeover offer of C$19.6 billion (US $17.3 billion), but said the overture could potentially lead to a “superior proposal.”

As a result, Inco can hold talks with Teck without canceling its existing pact to be acquired by Phelps for about C$19.6 billion (US $17.3 billion) in cash and stock.

Phelps would have the right to respond to a new offer from Teck.

Last week, sources familiar with the situation said Phelps was considering sweetening its offer by at least doubling the cash portion of its bid.

Phelps said on Monday it had no comment, and an Inco spokesman said the Canadian company would not elaborate on the specific timing or nature of any discussions with Teck.

Teck repeated on Monday that it considers its offer for Inco to be superior to the Phelps bid and is ready to take up and pay for Inco shares on August 16.

Inco had been trying to buy Falconbridge Ltd. , but conceded defeat to Switzerland’s Xstrata Plc (XTA.L), which had offered all cash for the company. Phelps, Inco and Falconbridge had forged a three-way deal to try to keep Xstrata at bay.

Inco said it would apply to the Ontario Superior Court of Justice on August 10 for an order approving the proposed merger plan with Phelps. Inco plans to hold a meeting on September 7 for shareholders to vote on the Phelps deal.

Inco shares were off 35 cents at $79.03, and Teck Cominco’s B shares slipped 38 cents to $71.40 on the
New York Stock Exchange in afternoon trading. The Toronto Stock Exchange was closed for the holiday.

Phelps Dodge stock was up 66 cents at $87.03.