Bloomberg News

Inco May Consider Merger With Teck, Falconbridge

June 01, 2006

Inco Ltd., the world's second-largest nickel producer, said it may consider coordinating a three-way merger involving Teck Cominco Ltd. and Falconbridge Ltd.

Inco, which is attempting a friendly C$19.3 billion ($17.5 billion) acquisition of Falconbridge, also may position itself as a takeover target, the Toronto-based company said in a May 29 regulatory filing. The company yesterday rejected Teck Cominco's C$16.4 billion hostile bid.

``No one should make any mistake, we are 100 percent committed to our deal with Falconbridge as the best way to create value for our shareholders,'' Inco spokesman Steve Mitchell said today in an interview.

The heads of the three Canadian companies have discussed the possibility of combining since Teck Cominco said May 8 it planned to buy Inco, regulatory filings say. Inco Chief Executive Officer Scott Hand met his counterparts at Teck Cominco and Falconbridge on May 10 to ``discuss the possibility of a transaction involving all three of their companies,'' according to one filing.

A day later, Hand tried calling Teck Cominco Chairman Norman Keevil, who had written Hand in September to propose a ``merger of equals,'' to discuss a transaction involving the three companies, the filing said. Keevil couldn't take the call.

Investigating Alternatives

Inco's board said May 25 that it was best to ``investigate, with the assistance and advice of its financial advisors and legal advisors, one or more of such transactions,'' the company said in the filing. Four days later, the board unanimously rejected the Teck Cominco offer, which was conditional on the Falconbridge acquisition being scrapped.

``Our board has a fiduciary duty to look at the possible alternatives for our shareholders, and the notion of a three-way deal is just one of those,'' Mitchell said.

Falconbridge said yesterday that it favors the Inco bid and rejected a hostile offer from its largest shareholder, Swiss mining company Xstrata Plc. (XTA)

Inco and Falconbridge have delayed their transaction three times to allow European and U.S. regulators enough time to review the proposal, which would create the world's largest nickel producer. The deadline for Inco's offer for Falconbridge is June 30.

``A likely eventual outcome will be a three-way deal,'' Salman Partners analyst Raymond Goldie said today in an interview.

Inco shares rose 60 cents, 0.8 percent, to C$73.10 at 4:09 p.m. on the Toronto Stock Exchange. Teck Cominco fell C$1.30, or 1.9 percent, to C$68.80 and Falconbridge rose 40 cents to C$55.15.

To contact the reporter on this story: Danny King in Los Angeles at dking19@bloomberg.net

To contact the editor responsible for this story: Dan Reichl at dreichl@bloomberg.net.


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