Noranda names successor to Falconbridge’s James

A 57-year-old metallurgist who heads Noranda’s copper group, Balogh will run the non-communist world’s second-largest nickel producer on behalf of Noranda and Trelleborg. Each company is offering to acquire 50% of Falconbridge’s outstanding shares.

Reporting to him will be an as-yet-to-be-named chief financial officer who represents the Swedish conglomerate.

While Balogh preferred to wait until the $37-per-share acquisition is completed before discussing his new role, analysts expect him to take a low-key, less individualistic approach to running Falconbridge than did James during his seven years with the company.

Balogh graduated from Montreal’s McGill University and started out by “tapping bricks” at Noranda’s Rouyn, Que., operations in 1954. He worked for the Falconbridge chief before James left Noranda to join a then-ailing Falconbridge in 1982.

“It wouldn’t surprise me if there were reductions at the senior level,” said Graham Eacott, a senior base metals analyst at Merrill Lynch Canada.

After the Falconbridge shares are tendered and paid for, Eacott expects the nickel miner to be run as a private entity by its two largest shareholders. Each is planning to nominate five representatives to a new board of directors.

“Each company will equity account for 50% of Falconbridge’s profits (which last year stood at $34.1 million or $4.57 per share),” said Graham. But the Merrill Lynch analyst doesn’t expect Noranda and Trelleborg to split up Falconbridge’s biggest assets which include the Kidd Creek copper-zinc mine near Timmins, Ont., or the company’s Sudbury nickel operations.

If a third bidder doesn’t enter the scene before the Noranda/Trelleborg offer expires Sept 15, Noranda will have paid an average $30.46 for the Falconbridge shares it has acquired since last summer. As a result of a creeping acquisition bid, Noranda had acquired a 23.8% stake in Falconbridge before a $36.125 per share takeover offer by New York-based Amax Inc. forced Noranda and its Swedish partner to make a higher offer.

Trelleborg, which already owns about 3.3% of the nickel miner’s 77.6 million outstanding shares, will pay an average of just under $37 for the shares it is acquiring.

For Trelleborg, Falconbridge’s nickel operations will provide the missing link in a chain of products which includes copper, lead and zinc.

The acquisition of a 50% stake in Falconbridge will also have obvious advantages for Noranda. “It could add as much as 90 cents per share to Noranda’s pro-forma earnings,” said Dean Witter Reynolds’ (Canada) mining analyst Ernest Nutter. The nickel miner’s assets also will make Noranda much more of a “mining company” than it was before the proposed acquisition was announced, according to Nutter. He was referring to the fact that earnings of $203 million reported last year from Noranda’s minerals wing lagged behind the $246 million reported by the diversified resource giant’s Forest products division.

With Falconbridge under its wing, Noranda will also increase its clout in the resource industry by producing 9.6% of the non-communist world’s zinc output, 7.5% of its nickel and 3.2% for copper, according to Nutter.

At presstime, Noranda and Trelleborg said six Canadian banks were waiting to extend a $2.25-billion line of credit to FL Acquisition Corp., the company set up to acquire the Falconbridge shares. Due and payable by February, 1991, the loans are secured by a $500- million(C) bank letter of credit and the Falconbridge shares, which at presstime were trading at $36.75.

Meanwhile, as he waited for the offer to expire, Balogh was reminding reporters of some advice which his new colleague, Trelleborg’s managing director Rune Andersson, had offered a week earlier. “Never wear the bearskin until you have shot the bear,” he said.

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