Falco fight heats up as end nears

With the deadline for Inco‘s (N-T, N-N) bid for Falconbridge (FAL-T, FAL-N) just hours away, Xstrata (XSRAF-O, XTA-L) turned up the heat on Thursday, announcing plans to buy up additional Falco shares on the open market once the company’s poison pill expires on Friday.

Falconbridge shareholders have until the end of today to decide whether to tender to Inco’s offer of $18.50 in cash plus 0.55676 of an Inco share. The bid was worth around $65.18 at midday on Thursday.

Inco’s bid is contingent on at least 50.01% of Falconbridge’s outstanding shares being tendered.

Under an earlier ruling by the Ontario Securities Commission, Xstrata is allowed to buy up to another 5% of Falco’s shares. That would give the Swiss miner a 25% stake in Falco, probably good enough to block Inco’s competing bid.

Xstrata said it would acquire new shares with the aim of achieving its consistently stated goal of acquiring all of Falconbridge’s outstanding common shares.

The market seems to have picked Xstrata’s all-cash offer of $62.50 per share as the winner, with Falco shares trading not far from that level for the past few days. Still, the offer needs formal shareholder approval, which will be sought at Xstrata’s shareholders meeting on Aug. 14. The offer expires the same day.

Xstrata previously dropped the minimum acceptance level on its offer, and plans to take up and pay for any shares submitted to its offer.

Falconbridge responded to Xstrata’s announcement by encouraging its shareholders to tender to Inco’s offer.

“We believe the purchase of additional shares will effectively end the auction process currently taking place. Therefore, it is critical for Falconbridge shareholders to tender today to the Inco offer for it to succeed,” said Falco CEO Derek Pannell in a prepared statement.

Late on Wednesday, Inco made a desperate plea to investors, once again touting the virtues of its three-way plan with Phelps Dodge (PD-N), and asking Falco shareholders if they were prepared to “give all that away to Xstrata by accepting their lower cash offer.”

Concluded Inco CEO Scott Hand: “Falconbridge shareholders need to understand that this is it – this is their chance to make this great nickel copper company a reality – and they need to act and tender now.”

With Xstrata’s bid open until Aug. 14, its questionable whether this really is it. If Inco’s bid fails to gain it control of Falconbridge, the company could further extend its bid, this time without the safety net of Falconbridge’s shareholders’ rights plan.

Tonight’s bid deadline isn’t the only one Inco faces today; unionized workers at its Voisey’s Bay nickel mine in northern Labrador will be in a position to strike if a labour pact isn’t struck by midnight tonight, reports Reuters.

Shares in Falconbridge were 12 cheaper at $62.27 in early afternoon trading in Toronto on July 27; Inco was 80 better at $83.85. For its part, Phelps was up US91 at US$78.73 in New York. In London, Xstrata was more than 5% higher at 2,141 pence.