Xstrata tries again to foil Phelps Dodge buy of nickel firm
Xstrata Plc increased its hostile bid for Canadian nickel miner Falconbridge Ltd. by 7.2 percent to $16.3 billion to thwart Phoenix-based Phelps Dodge Corp.’s plans for the mining industry’s largest takeover.
Xstrata, the Zug, Switzerland-based producer of coal, zinc, copper and chrome, said in a statement that it will pay 62.50 Canadian dollars or $55.08 a share for the 80 percent of Falconbridge it doesn’t already own. The company earlier offered 59 Canadian dollars. Phelps Dodge, the world’s third-largest copper producer, said its offer was “best and final” and a better deal for Falconbridge’s investors.
Some investors say Xstrata’s bid was a knockout blow. Shares of Phelps Dodge surged Wednesday on speculation the company will be worth more without the added debt and new stock needed for its deal, said Nancy Havens-Hasty, president of New York-based Havens Advisors LLC, which runs a $200 million hedge fund.
“People think that maybe Phelps Dodge isn’t going to win,” Havens-Hasty said.
Mining companies are battling for natural resource assets as China, the world’s largest consumer of metals, drives copper, nickel and zinc to record levels. The price of nickel, used in stainless-steel production, has more than tripled in the past three years.
Toronto-based Falconbridge said in a statement that it is reviewing the details of Xstrata’s new offer.
On Sunday, Phelps Dodge Corp. and Canada’s Inco Ltd. raised their offer to Falconbridge shareholders by about half a billion to $17.3 billion in cash and stock for all of Falconbridge’s stock, The Associated Press reported.
Phelps Dodge Chief Executive J. Steven Whisler said in a statement that his company’s bid “is the only proposal that allows Falconbridge shareholders to participate in the enormous synergies and upside available only by combining these three companies. This is the best and final proposal for Falconbridge that we will support. It is time for Falconbridge shareholders to decide what is truly in their best interests.”
Shares of Phelps Dodge rose $3.77, or 4.9 percent, to close at $81.03 in New York Stock Exchange composite trading, the biggest one-day gain since June 29. The rally may signal that investors expect Xstrata to acquire Falconbridge.
“It’s hard to see that this is not close to the final chapter,” said Gavin Graham, director of investments at Toronto- based Guardian Group of Funds, which holds Falconbridge and Inco shares among $5.3 billion of assets.