Vancouver – The board of Inco (N-T, N-N) has finally capitulated, recommending shareholders tender to Companhia Vale do Rio Doce‘s (RIO-N) all cash offer of $86 per share for the company.
The move marks the end of an era for the Canadian nickel giant that has operated for more than a century, enjoying its position as one of the world’s preeminent 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 share the vision of that combination resulting in the pair moving on. The failure to consummate 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, now almost a certainty with CVRD’s offer.
Additionally, Inco’s friendly merger plan with fellow Canadian nickel major Falconbridge (FAL-T) dissolved earlier this summer 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 a planned $89.00 per share level.
CVRD’s $19.4-billion offer is conditional at least two-thirds of Inco’s fully diluted shares being tendered, now pretty much a certainty with no other rivals emerging and the nod from the board. By pulling Inco under its wing, CVRD stands to significantly 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 tight range around the $85-level on TSX trading following the recommendation of acceptance.
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