Mining firms raise bids in 3-way deal

Mining firms raise bids in 3-way deal

Phelps Dodge has raised its bid for Inco, and Inco has raised its offer for Falconbridge, as the companies battle to protect their proposed $41 billion three-way merger and create the biggest mining company in North America.

The moves, announced Sunday, are aimed at thwarting a hostile offer from the Swiss-based Xstrata for Falconbridge and a hostile offer from Teck Cominco for Inco.

Inco shares rose 60 cents to €52.90, or $66.34, in late morning trading in Frankfurt. Falconbridge was little changed at €42.57. Phelps Dodge rose 74 cents, or 0.9 percent, to close at $79.79 in New York Stock Exchange composite trading on July 14.

Inco, whose offer is being backed by the U.S.-based Phelps, was under pressure to raise its bid for Falconbridge after Xstrata sweetened its bid for the 80 percent of Falconbridge it does not already own to 59 Canadian dollars, or about $52, a share last week.

The higher all-cash offer from Xstrata, combined with the fact that Falconbridge’s shareholder rights plan expires July 28, meant that the last day Inco could raise its offer was Monday, as revised bids need 10 days for shareholders to review.

Inco has now increased the cash portion of its offer for Falconbridge by 1 dollar, to 18.50 dollars. The stock portion of the offer was unchanged at 0.55676 of an Inco share. Based on Friday’s closing price, Inco’s offer is worth 60.20 dollars a share.

Phelps, a copper producer that angered some investors by agreeing to buy Falconbridge and Inco, raised the cash portion of its bid for Inco by 2.75 dollars to 20.25 dollars. The stock portion of the bid remains 0.672 of a Phelps share.

Phelps’s offer for Inco is not conditional on Inco’s getting Falconbridge. Phelps and Inco have amended their agreement so that the Phelps-Inco deal “may be consummated” before Inco acquires 100 percent of Falconbridge.

Inco has reduced its minimum take- up condition to 50.01 percent, from a two-thirds requirement in the previous offer. Inco also extended its offer by three days to July 27.

If the trio are successful, they would create a company that is the world’s largest nickel producer and largest publicly traded copper producer with strong positions also in cobalt and molybdenum.

In endorsing Inco’s latest offer, Falconbridge’s directors declared a special cash dividend of 75 cents per Falconbridge share, payable Aug. 10.

The companies said the implied value of Inco’s cash and stock offer for Falconbridge “stands at 63.43 dollars” a share, higher than the unsolicited offer by Xstrata.

Calls to Xstrata were not returned, though a person familiar with the case said, “This isn’t over.”

Xstrata’s offer expires Friday and needs approval from the Canadian authorities. Inco’s offer for Falconbridge has met all regulatory requirements.

As part of the three-way deal, Phelps expects to repurchase as much as $5 billion of its shares in the 12 months after closing.

Phelps’s sweetened cash and stock offer for Inco, valued at 80.70 dollars, is higher than Teck’s cash and stock offer, at about 78.50 dollars. Teck has asked Canadian regulators to strike down Inco’s shareholder rights plan and has said it sees no need to increase its offer.


Share this post