Merger Efforts and Acquisition
On October 11, 2005, Inco announced a proposal to acquire Falconbridge for $12 billion. This came at a time of especially high prices for base metals, including nickel. Part of the motivation for the merger was to avoid a takeover of either company by cash-flushed foreign competitors. Additionally, significant synergies would have been realized in the Sudbury operations, with both companies performing the same kind of extraction and smelting work on the same kind of ore.
The two companies were set upon by hostile takeover bids from rival firms. Swiss Xstrata, already 19.9% owner of Falconbridge, bid for a complete acquisition, while Teck Cominco of Vancouver set its sights on Inco.
On May 13, 2006, Inco announced that it increased its offer to acquire Falconbridge by $5.00 CAD per share, bringing the bid to $61.04 CAD per share (based on the June 23, 2006 Inco/Phelps Dodge share price).
On June 26, 2006, Phelps Dodge made a bid for the proposed combined Inco/Falconbridge company, valued at around $40 billion USD. This would have formed the Phelps Dodge Inco Corp., valued at $56 billion USD, creating the fifth largest mining company, largest nickel producer, and the second largest copper producer in the world with corporate and copper division headquarters located in Phoenix, Arizona and nickel division headquarters in Toronto, Ontario. The deadline for the Inco offer was July 13, 2006.
On May 18, 2006, Xstrata had announced a proposal to acquire Falconbridge for $52.50 CAD per share. This was a cash offer, unlike the Inco offer of a combination of cash and shares. On July 12, 2006, Xstrata announced that it increased its offer to acquire Falconbridge to $59.00 CAD per share (an approximate total value of $22.5 billion CAD). This counter-offer was 9.6% higher than Inco's bid. The deadline for Xstrata's bid to be complete was July 21, 2006. Xstrata acquired and absorbed Falconbridge in late August 2006, leaving Inco open to bids by Phelps Dodge and the Brazilian company CVRD. Falconbridge became Xstrata Nickel, which is still based in Toronto.
Read more about this topic: Falconbridge Ltd.
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