Vancouver — Inco’s board (N-T, N-N) has finally capitulated, recommending shareholders tender to Companhia Vale do Rio Doce’s (RIO-N) all-cash offer of $86.00 per share for the company.
The move marks the end of an era for the Canadian nickel giant, which has operated for more than a century, enjoying a position as one of the world’s pre-eminent producers of the metal. It is now considered highly unlikely any other bids will emerge to trump that of Brazilian iron ore giant CVRD, which has extended its offer until mid-October to allow for final regulatory clearances.
Until early September, Inco’s board supported a proposed merger with Phelps Dodge (PD-N) but shareholders clearly did not and the pair moved on. The failure to consummate the deal cost Inco an initial US$125-million break fee with an additional US$350 million payable to the Arizona-based copper giant should another company purchase Inco within a year — almost a certainty with CVRD’s bid.
Inco’s friendly merger plan with fellow Canadian nickel major Falconbridge also dissolved this year when its Sudbury basin neighbour was acquired by Swiss-based Xstrata (XSRAF-O, XTA-L).
Another rival bid for Inco by Vancouver-based Teck Cominco (TCK.B-T, TCK-N) died in mid-August when it became apparent the diversified miner could not quickly raise the $5.7 billion necessary to boost its bid to the $89.00-per-share level.
CVRD’s $19.4-billion offer is conditional on at least two-thirds of Inco’s fully diluted shares being tendered, but since it has the nod from the board and no other rivals have emerged, it looks likely to succeed. By pulling Inco under its wing, CVRD stands to benefit from the strong nickel market of late, plus gain the technical expertise to boost planned output from a couple of large nickel-laterite projects under development in Brazil.
Shares of Inco settled in a tight range around $85.00 on TSX trading following the board’s announcement.
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