CVRD and Inco meet the press

A day after announcing that Companhia Vale do Rio Doce (CVRD) had acquired 76% of Inco‘s (N-T) shares and were closing in on finalizing the acquisition, 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’s chief executive Roger Agnelli, the new company will be not much different than it looks now.

“Inco’s been doing a great job,” Agnelli said in his 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, Inco’s chief executive Scott Hand will stay on board 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 UK operations, Mark Cutifani, will take his place.

The team will immediately take charge of an expanded portfolio, as two of CVRD’s nickel assets will be transferred over 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, then Canadians are soon to be charmed by the Brazilian powerhouse. Agnelli heaped praise on Hand, Inco, and Canada as a whole.

“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 get into a position to make its all cash $19 billion offer — the company was in the enviable position of being offered US$30 billion to complete the transaction.

Agnelli smiled when the sum was brought up, and smiled again when questioned as to whether CVRD would have to sell off any assets to pay for the roughly $19 billion acquisition.

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

CVRD’s deep pockets will also play into a speedy payoff of the loans it took for the deal, Agnelli said. He pointed to the company’s strong cashflow as being the key to allowing it to reduce its leverage back to pre-Inco deal levels within two to three years.

“I use to work for a bank,” Agnelli said of his 22-year 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 12,000 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 business results weren’t enough to keep Inco at the helm — a fact that has some onlookers lamenting over 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 (ABX-T, ABX-N) and Teck Cominco (TEK-T) 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.

“It’s better off for efficiencies, better off for productivity, and better off for rationalizing the markets,” Agnelli offered.

Hand also made assurances that the name Inco will continue to be synonymous with nickel and will continue to provide jobs for Canadians.

It was a point picked up on by a media member from Inco’s traditional stronghold of Sudbury.

“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.”