VANCOUVER — Inco Ltd.'s share price rose Monday after Teck Cominco Ltd. revised its bid for the nickel miner, offering more cash and fewer shares to Inco shareholders.
Under the new proposal, Teck will give Inco shareholders $82.50 a share in cash, or 1.1293 Teck class B subordinate voting shares plus five cents per Inco share.
If all stockholders requested cash instead of shares, they would get $40 in cash and 0.5821 of a Teck share for each Inco share.
Monday afternoon Inco responded with a release saying it was reviewing the offer. “The Inco board of directors will evaluate the revised offer and will provide Inco shareholders with a formal recommendation as soon as it has completed its analysis,” the company said.
Inco stock jumped on news of the new bid, rising above $88 on Monday morning. It settled slightly to $87.45, up 1 per cent or 88 cents, on the day.
Since it first made its bid for Inco in May, Teck said it would go ahead only if Inco's plan to buy Falconbridge Ltd. was withdrawn. Last Friday, Inco conceded defeat in its proposal to merge with Falconbridge after being out-bid by Anglo-Swiss mining giant Xstrata PLC.
Teck's chief executive officer Don Lindsay said in a statement that his company's revised offer “crystallizes substantial value for Inco shareholders” who choose the cash option.
In a conference call with analysts, he said the company “recognizes the fact that cash is highly desirable in these transactions.”
The bid offers more certainty for Inco shareholders than the rival bid from Arizona-based Phelps Dodge Corp., Mr. Lindsay said, and it includes almost twice as much cash.
He also noted that Teck's bid has received all the required regulatory approvals, while Phelps Dodge still has to hear from Investment Canada. The U.S. company also needs approval from its own shareholders and those of Inco.
“It's no secret a number of significant [Phelps] shareholders don't like the deal,” Mr. Lindsay told the analysts.
In contrast, Teck's proposal is a “good clean offer” and will close as planned on August 16, he said.
Teck will pay as much as $9.1-billion in cash and will issue up to 132.3 million shares under the new offer. That represents an increase in the cash component of $2.7-billion, or 43 per cent, and a decrease of 10.7 million shares, or 7.5 per cent, compared to the original offer.
As for Inco's high share price, there is “a lot of speculation built into the stock price which we don't believe is justified,” Mr. Lindsay told the analysts.
“Without the artificial support provided by the two takeover offers it would likely be only in the low 60s at best,” he said, arguing that Inco's share price is “substantially above its underlying value” in view of problems at the company's Goro development in the South Pacific and at Voisey's Bay in Labrador and Thomson, Man.
“The market has run wild on speculation of a bidding war for Inco — and who knows, stranger things have happened — but we will not be drawn into that,” Mr. Lindsay said.
Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier, said Teck's new bid is “a much stronger offer than Phelps Dodge.”
“It's a more attractive offer to hedge funds because there's quite a bit more cash that's on the table — almost twice as much,” he said.
But, he added, Monday's cash hike shouldn't be taken as a sign of further increases by Teck, which is known as a disciplined investor.
With files from Canadian Press
