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Mining guru Peter Munk slammed the largest takeover bid in Canadian history, saying U.S. copper miner Phelps Dodge Corp.'s $40-billion (U.S.) offer to acquire Inco Ltd. and Falconbridge Ltd. is irrational and without net benefit to Canada.

"It's absolutely against Canada's interests," said the chairman of Toronto's Barrick Gold Corp., which recently became the world's largest gold producer with a $10-billion takeover of Placer Dome Inc. of Vancouver.

Mr. Munk said the friendly Phelps transaction, which would create the world's largest publicly traded copper and nickel producer, would diminish Canada's role as a global mining centre, leading to a loss of employment, income and wealth.

"There is the legal fraternity, there are the stock exchanges and there is the financial community. All of us have a vested stake in having a major mining presence with a Canadian home office, as opposed to having the whole thing taken to Phoenix," said the 78-year old, who was reached in Switzerland.

Nickel miner Inco sought out a partner in Phoenix-based Phelps to help increase its own takeover offer for Falconbridge by 24 per cent and top an all-cash hostile bid from Anglo-Swiss miner Xstrata PLC, which already owns about a fifth of Falconbridge stock.

Xstrata's offer, which valued Falconbridge at $20-billion (Canadian), was dealt a double blow on Friday when the Ontario Securities Commission allowed Falconbridge's poison pill defence to remain in place until July 28, well after the Xstrata bid expires on July 7. An Ontario Court also ruled Friday that Falconbridge was within its rights to delay its annual meeting of shareholders.

An Xstrata spokesman declined to comment yesterday on whether the company would extend its bid or increase its offer.

Meanwhile, Vancouver's Teck Cominco Ltd. has decided to let its own hostile offer (valued at $18-billion when launched in May) stand. Teck chairman Norman Keevil recently said Inco's chief executive officer, Scott Hand, had "sold Canada out for his own purposes" by striking a deal with Phelps.

The European Commission will rule on the Inco-Falconbridge merger today and is expected to grant conditional approval to the transaction, which received U.S. Department of Justice clearance last month.

However, Mr. Munk said an Investment Canada review of the next stage of the three-way combination -- the Phelps offer to buy a combined Inco-Falconbridge -- will be unable to find the deal in the national interest.

"Canada's government has a responsibility to enforce the law. And under the current laws on the books, they have to prove a transaction of this magnitude is of net interest to Canada. I have talked to a large number of people and I have not heard anyone yet who could articulate a major Canadian interest here."

The Canadian government should not appear protectionist and shoot down the deal, Mr. Munk said.

Rather, Ottawa should simply take its time giving a ruling.

"All they have to do is delay and I promise you they will," Mr. Munk said.

The Canadian business legend sees little rationale in combining Inco and Falconbidge with Phelps. He thinks Phelps shareholders won't approve the deal at a vote slated for the fall.

He cites the fact that Phelps is bidding at what is likely the top of the current cycle for base metals, with shares that are trading at about six times earnings, compared with the roughly 12 times that Inco and Falconbridge are valued at.

Mr. Munk believes that Inco and Teck will eventually put their differences aside and merge. He said Falconbridge will eventually be sold to Xstrata and suggested that Teck could strike a deal with the Anglo-Swiss company to run Falconbridge's Sudbury operations alongside Inco's.

Admitting he was "Monday morning quarterbacking," Mr. Munk wondered why Inco didn't inform Xstrata of its intention to bid for Falconbridge.

"You don't snub someone," Mr. Munk said. "Especially when they own 20 per cent. Give me a break."

*****

On why Phelps' bid may fall...

'There are no synergies, there is zero rationale...this doesn't make sense and the shareholders are never going to allow it.'

On mining conglomerates...

'I don't believe (Phelps chairman and CEO Steven) Whisler even knows nickel from tin.'

On losing head offices...

'All of us have a vested stake in having a major mining presence with a Canadian home office, as opposed to having the whole thing taken to Phoenix.'

On what's in it for Canada...

'I have not heard anyone yet who could articulate a major Canadian interest here.'

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