Toronto — Investment Canada has extended for an additional 30 days its review of a proposed merger between U.S. copper giant Phelps Dodge Corp. and Inco Ltd., leaving shareholders to vote on the deal before it clears the last regulatory hurdle.
In a filing with U.S. regulators Wednesday, Phelps said Canada's Industry Ministry had “extended the review of our application for an additional 30-day period as permitted under the Investment Canada Act.”
The merger, valued at $17.7-billion at Wednesday's prices, needs approvals from Inco and Phelps shareholders at meetings scheduled for Sept. 7 and Sept. 25.
At least one major Phelps Dodge shareholder, Atticus Capital LP, has said it will vote against the deal, citing the amount of debt Phelps will take on to proceed with the transaction.
The review extension comes after numerous twists in what has become one of the biggest mining mergers in Canadian history, and at one time involved five players.
Inco's only other suitor now is Brazil's CVRD (NYSE:RIO), which is offering $17.5 billion in cash for the company, but the nickel miner had also been courted by Teck Cominco Ltd.
Teck dropped out of the race earlier this month after failing to meet its own stock-tender condition in the face of CVRD's all-cash bid.
Inco has consistently backed Phelps Dodge's cash-and-stock offer, but it opened the door to possible negotiations with CVRD last week.
Analysts give Phelps Dodge only slim chances of succeeding, since investors often choose cash offers over those that include stocks.
“Everything's certainly gone quiet on the Phelps Dodge front, there doesn't seem to be anybody else out there making noises, so the market's pretty much accepted that it's a done deal,” said Paradigm Capital analyst David Davidson.
Ray Goldie, a metals analyst with Salman Partners, said the Investment Canada delay won't change much for Phelps, although it may signal CVRD's own review by the agency could “take longer than anyone's anticipated.”
Phelps joined the battle for Inco while the Canadian firm was trying to complete a merger with onetime rival Falconbridge Ltd., but that company was won this month by Swiss-based Xstrata PLC, which made an all-cash offer.
On the TSX near midday Wednesday, Inco shares were down 15 cents to $86.10. Phelps Dodge was down $1.13 to $88.91 (U.S.) on the New York Stock Exchange, while CVRD fell 82 cents to $20.99.
