Inco Ltd. has abandoned its takeover quest for rival Falconbridge Ltd., conceding defeat after its offer failed to win a majority of shareholder support and handing victory to a rival bid from foreign miner Xstrata PLC.
”Though a large number of shareholders supported our offer, unfortunately it wasn't enough,” Inco chair and chief executive officer Scott Hand said in a statement early Friday.
The retreat brings the heated battle for Falconbridge to a close, ending Inco's nine-month campaign to merge the rival mining companies.
Many people at Inco are disappointed Mr. Hand said, ”but the shareholders have spoken, and we're moving on.”
From left, Derek Pannell, CEO of Falconbridge, Steven Whistler, CEO of Phelps Dodge and Scott Hand, CEO of Inco are photographed during an editorial board meeting at the Globe and Mail July 10/2006. (Kevin Van Paassen/The Globe and Mail)
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Inco said it will now focus on a two-way deal with Phelps Dodge Corp. Inco recruited the Phoenix copper giant to help finance its bid for Falconbridge and to fend off Xstrata. Phelps agreed to buy a combined Inco and Falconbridge in a three-way, $40-billion merger – the largest takeover offer in Canadian history.
But the plan failed after Xstrata boosted its hostile bid last week for the 80 per cent of Falconbridge it doesn't already own to $62.50 per share. Phelps refused to give further financial support, forcing Inco to say its bid was its ”best and final.”
Inco's stock and cash bid was worth nearly $3 more at the close of trading yesterday, but many Falconbridge shareholders felt Inco's stock was being supported by the belief the nickel producer itself would soon be the subject of another bidding war.
In addition to the friendly offer from Phelps, Inco is also facing a hostile bid from Vancouver's Teck Cominco. Now that it has lost Falconbridge, major foreign miners including Brazil's CVRD are expected to re-evaluate possible bids for Inco.
Under the terms of Inco's unsuccessful merger plan with Falconbridge, an enhanced expense payment of $150-million (U.S.) is now payable by Falconbridge to Inco. And a breakup fee of $300-million (U.S.) will be payable to Inco if major shareholder Xstrata completes its proposed acquisition. Falconbridge said its board of directors will meet ”to review these latest developments, including the implications of Xstrata having stated its intention to acquire up to five per cent of the common shares of Falconbridge through market purchases, as well as Xstrata's having been granted approval by Investment Canada to proceed with its proposed acquisition of Falconbridge.
”The board will provide Falconbridge shareholders with a formal recommendation thereafter.”
The sale of Falconbridge's Nikkelverk refinery to LionOre Mining International Ltd. now will not proceed as it was contingent on the acquisition of Falconbridge by Inco.
Losing Falconbridge wasn't the only defeat Inco suffered last night. At midnight, the company's unionized workers at its Voisey's Bay nickel mine and mill operation in northern Labrador went on strike after contract talks with management broke down over monetary issues.
The total work force at Voisey's Bay is about 420 and they are represented by the United Steelworkers union. The strike is the first at the remote location since Inco acquired the rich mineral deposit in 1996.
-with files from Canadian Press
