Xstrata Makes Hostile Bid for Falconbridge in CAD 16.1bn Deal

Strategic Insights -

Xstrata, a UK-listed mining group, has made a hostile CAD 16.1bn all-cash bid for Falconbridge, a Canadian copper and nickel producer, in a bid to take advantage of the commodities boom. The move comes after Inco, a Canadian miner, increased its bid for Falconbridge from CAD 17bn to CAD 19.6bn based on its current share price. The deal has the potential to trigger a wider takeover battle in the Canadian mining sector.

Key Takeaways:

  • Xstrata's bid for Falconbridge is worth CAD 16.1bn, representing a 12.3% premium to the value of Inco's offer before the announcement of the Teck bid.
  • Inco has increased its bid for Falconbridge from CAD 17bn to CAD 19.6bn, valuing the Canadian copper and nickel producer at CAD 20bn.
  • The rising price tag of the bids reflects the recent rally in copper and nickel prices, and mining companies' scramble to buy up assets to take advantage of the commodities boom.
  • Xstrata's interest in Falconbridge's Latin American copper interests, particularly its stakes in the Antamina and Collahuasi mines, is seen as a key factor in the deal.
  • Falconbridge's management has indicated that it still favors Inco's proposal, citing the "unique and real synergies" available from the Inco-Falconbridge combination.
  • The deal has the potential to trigger a wider takeover battle in the Canadian mining sector, with Teck Cominco's hostile takeover bid for Inco adding to the uncertainty.

Statistics:

  • Xstrata's bid for Falconbridge is worth CAD 16.1bn.
  • Inco's increased bid for Falconbridge is worth CAD 19.6bn.
  • The recent rally in copper and nickel prices has lifted the value of Xstrata's offer by 12.3%.
  • Falconbridge's share price rose 2.2% to CAD 55.18 in Toronto at midday yesterday.
  • Inco shares have risen more than 12% since the Teck bid, inflating the value of its cash-and-shares offer for Falconbridge.

Sources:

  • "Xstrata makes CAD 16.1bn hostile bid for Falconbridge in hopes of sparking takeover battle in Canadian mining industry", Bloomberg, no date.
  • "Inco increases bid for Falconbridge to CAD 19.6bn", Bloomberg, no date.
  • "Xstrata faces cash mountain ahead of Falconbridge takeover", The Financial Times, no date.
  • "Inco, Falconbridge facing shareholder pressure", The Globe and Mail, no date.