EU Regulators OK Inco Bid for Falconbridge

EU Regulators OK Inco Bid for Falconbridge

EU regulators on Tuesday cleared Canadian company Inco Ltd.’s $15 billion purchase of Falconbridge Ltd., a deal that would create the world’s largest nickel producer, but joined U.S. regulators in ordering Falconbridge to sell off a Norwegian nickel refinery.

Canada’s Falconbridge is at the center of a bidding war between Inco’s ‘friendly’ cash-and-stock offer and an unsolicited bid from Anglo-Swiss firm Xstrata PLC.

If Inco’s purchase of Falconbridge goes through, Phoenix-based miner Phelps Dodge Corp. plans to acquire the combined company for $40 billion.

Inco is also a takeover target for Teck Cominco Ltd. and that deal is contingent on Inco’s offer for Falconbridge falling through.

The European Commission cleared Inco’s offer to buy Falconbridge after an in-depth probe confirmed that the tie-up would create antitrust problems on some European nickel and cobalt markets.

But it said it could approve the deal if Falconbridge agreed to sell its Nikkelverk nickel refinery in Kristiansand, Norway, and related assets to London-based LionOre Mining International Ltd.

Both companies had to agree to the sell-off to gain U.S. Department of Justice approval for the deal last month.

Inco and Falconbridge _ both headquartered in Toronto _ are by far the two largest manufacturers of high-purity nickel, which is used in super alloys to make safety-critical parts like the rotating components of jet engines.

Since it would have no rivals, the new company would have been able to drive up prices, EU regulators said. The Commission was also worried that the deal would allow the new company to delay some of its existing and future mining projects to maintain the current tight supply and keep nickel prices high.

The Commission said it would rule on Teck’s bid for Inco by July 7 and Xstrata’s offer for Falconbridge on July 13.

Nickel is used primarily in stainless steel and batteries. Inco and Falconbridge estimated their combined nickel production for 2005 to 735 million pounds, which is forecast to grow to 1 billion pounds by 2009.

The new company would also be a significant global copper producer, with forecast 2005 production of 1.33 billion pounds, expected to increase to about 2.4 billion pounds in 2009.

With extensive operations in North and South America, Asia, the South Pacific and Europe, the new company would represent combined revenues of $6.4 billion for the six months ended June 30.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

The Associated Press

Share this post