CVRD sambas into Toronto

A day after announcing that Brazilian iron ore giant Companhia Vale do Rio Doce (CVRD) (RIO-N) had acquired 76% of Inco’s (N-T, N-N) shares and were closing in on finalizing the takeover, the top brass of the two companies were in Toronto to give a preliminary sketch of what the new CVRD Inco will look like.

And, according to CVRD chief executive Roger Agnelli, it will be much the same.

“Inco’s been doing a great job,” Agnelli said in Portuguese-accented English. “We don’t need to be in a hurry to change things. The company’s doing well, it’s making money, it’s growing, it’s updating, and it’s leading the industry.”

Staying in line with the business-as-usual motif, the Canadian nickel miner’s CEO, Scott Hand, will stay on as the chief executive of CVRD Inco. Indeed, the only change at the upper-management level comes by way of a retirement.

Peter Jones, Inco’s current chief operating officer, is resigning and Inco’s president of Canadian and U.K. operations, Mark Cutifani, will take his place.

The team will immediately take charge of an expanded portfolio, as management of two of CVRD’s nickel assets will be transferred to the Toronto-based division.

And while there has been much speculation that CVRD will soon create a new mining entity that would seek a North American stock listing, Agnelli said the company is in no rush to do so.

“We don’t have any intention right now to bring back Inco to the stock exchange,” he said as he was whisked away by a CVRD colleague. “Maybe next year that can be a very nice suggestion.”

If Agnelli represents the corporate spirit of CVRD, Canadians will soon be charmed by the Brazilian powerhouse. Agnelli heaped praise on Hand, Inco, and Canada as a nation.

“To be here in Canada for CVRD is an honour,” Agnelli said. “Canada is a mining country. We need to respect the culture, the differences, but we need to put together a balance; we need to put together a future.”

But sound business deals are not made on warm words alone, and it is the financial heft of CVRD that impresses most.

In the early days of the deal — when CVRD was seeking the financing it needed to make its all-cash, $19-billion bid — the company was in the enviable position of being offered US$30 billion to complete the transaction.

Agnelli smiled when the offer was brought up by the media, and smiled again when asked whether CVRD would have to sell off any assets to pay for the takeover.

“We are acquiring, not selling,” he said. “We don’t need to fund this transaction through selling assets.”

CVRD’s deep pockets will also assure a speedy payoff of the loans it took to complete the deal, Agnelli said. He pointed to the company’s strong cash flow as the key to allowing it to reduce its leverage to pre-Inco deal levels in two to three years.

“I used to work for a bank,” Agnelli said, referring to his 22 years of experience in the finance industry. “I hate leverage, so I would like to reduce the leverage as soon as possible.”

While Agnelli took much of the limelight, Hand was by no means left speechless. After being thwarted in earlier attempts to acquire Falconbridge outright, and then as part of a larger, friendly takeover by Phelps Dodge (PD-N), Hand expressed relief at being at the end of a long period of uncertainty.

“I’d like to start by acknowledging our twelve thousand employees,” he said. “It’s been a bit of a roller-coaster for them over the past year, but they’ve shown great patience, kept steady results . . . and delivered pretty good business results.”

But those results weren’t enough to keep Inco at the helm — a fact that has some onlookers lamenting the erosion of national corporate identity in an age of global consolidation.

Not surprisingly, the two chief executives spoke positively about the trend, with Hand emphasizing that Canadian companies such as Barrick Gold (ABX-T, ABX-N) and Teck Cominco (TCK.B-T, TCK-N) benefit from doing deals outside of Canada’s borders.

Agnelli and Hand both said that the increasing capital costs at larger projects require the financial muscle that consolidation brings. The trend also results in greater efficiencies, productivity and rationalization in the markets, Agnelli said.

Hand made assurances that the name Inco will continue to be synonymous with nickel and that the company will continue to provide jobs for Canadians — something especially important in Inco’s traditional stronghold of Sudbury, Ont.

“I recognize for everybody, that when something like this happens, there’s uncertainty, that’s just the nature of the beast,” Hand said. “But as time passes, I think you will see it’s going to be very good for Sudbury.”