Phelps Dodge Raises Bid for Inco and Falconbridge in Metals Auction

Strategic Insights -

Phelps Dodge Corp.'s chief executive, Steven Whisler, has expressed confidence that the company's shareholders will support the increased bid for Canadian nickel miners Inco Ltd. and Falconbridge Ltd. Whisler outlined the strategic and financial rationales for the proposed merger, emphasizing the potential cost savings and the acquisition of world-class copper and nickel assets. However, some Phelps Dodge shareholders have expressed concerns about overpayment, while Inco's management maintains that the latest bid is "a hell of a good offer."

Key Takeaways:

  • Phelps Dodge has raised its cash component for Inco's bid by C$2.75 a share to C$20.25 and for Falconbridge's bid by C$1 a share to C$18.50.
  • The Falconbridge board has declared a special cash dividend of 75 Canadian cents a share.
  • The implied value of Falconbridge's shares, including Phelps' bid for Inco, is C$63.09.
  • Xstrata PLC has raised its unsolicited cash bid for Falconbridge shares it doesn't already own to C$59 a share from C$52.50.
  • Inco's bid expires on July 27, and Falconbridge's shareholder rights plan terminates on July 28, which may lead to a takeover attempt by Xstrata.
  • Several Inco and Falconbridge shareholders believe a C$62 cash bid by Xstrata might be enough to end the auction.
  • Executives from Phelps Dodge, Inco, and Falconbridge emphasized the potential for cost savings and the acquisition of world-class copper and nickel assets.
  • They also downplayed concerns about copper and nickel prices, citing conservative price assumptions and the potential for economic growth in China.

Statistics:

  • The proposed deal aims to save over US$900 million in annual costs.
  • Phelps Dodge value of Falconbridge shares including Phelps' bid for Inco is C$63.09.
  • The implied value of Falconbridge's shares, including Phelps' bid for Inco, is C$63.09.
  • Xstrata's latest bid for Falconbridge shares it doesn't already own is C$59 per share.
  • Inco's latest proposal values Falconbridge at C$61.20 per share, including the special dividend.
  • The Falconbridge board has declared a special cash dividend of 75 Canadian cents per share.

Sources:

  • Dow Jones Commodities News via Comtex, July 17, 2006.
  • Comtex SmarTrend(SM) Alert, as of Thursday, 07-13-2006 23:59.