Noranda, Swedish ally up bid for Falconbridge

Noranda and Trelleborg are offering, through an acquisition company, to purchase for cash all of the outstanding shares they don’t already own of Falconbridge for $37 per share.

The bid tops by 87 cents the offer of New York-based Amax Inc. (NYSE), which recently announced it was willing to pay $36.125 per share.

On the TSE, the Noranda-Trelleborg morning announcement brought mixed results. By the close of that day’s trading session, Falconbridge had gained $1.38 to $38.13 on more than one million shares, while Noranda had slipped 13 cents to $24.88 on almost 362,000 shares.

Noranda is Falconbridge’s major shareholder with a 23.8% interest (27% voting interest). Trelleborg is a minor shareholder. Combined, Noranda and Trelleborg own about 21.5 million shares, or 31.2%, of the nickel producer (excluding the 9.2 million shares owned by McIntyre Mines, a wholly-owned subsidiary of Falconbridge).

The market seemed to be anticipating a higher bid by Noranda, but not everyone expected the move. Mining analyst Rick Cohen of securities firm BBN James Capel, for example, thought it likely Noranda, not wanting to increase its debt load, would cash in its shares and realize a profit of about $222 million.

Noranda, a mining and forestry giant controlled by Peter and Edward Bronfman through Brascan Ltd., and Trelleborg, an international metals company, report their offer is conditional upon acceptance by holders of at least 25 million of the shares outstanding, excluding the shares owned by McIntyre, and obtaining regulatory approval.

If successful in their offer, Noranda and Trelleborg say they will manage the Falconbridge operations on a 50/50 basis.

Falconbridge may be best known for its nickel-mining activities in the Sudbury basin area of northern Ontario. It also has mining operations in Norway and the Dominican Republic. The company also produces zinc, copper, silver and other minerals at its Kidd Creek operations at Timmins, Ont.

Noranda began buying shares in Falconbridge during the summer of 1988 and has made no secret of its desire to control the nickel producer. It is believed Noranda is most interested in the Kidd Creek operations in order to secure a source of feed for its Horne smelter at Rouyn-Noranda, Que.

Amax entered the bidding picture after it was contacted by Falconbridge Chairman William James. According to a directors’ circular issued by Falconbridge, James approached a number of mining companies in June and July of this year regarding possible takeover proposals.

A worldwide supplier of metals and energy products, Amax is the third largest aluminum company in the United States, that country’s third largest coal producer and the world’s leading primary producer of molybdenum.

To the end of June of this year, Noranda recorded net earnings of $283 million on total revenue of $4.7 billion. Its assets are listed at about $6.4 billion and its long-term debt at $2.1 billion. For the same period, Amax had net earnings of $245 million(US) on sales of $2.1 billion. The company lists assets of $4.2 billion and long-term debt of $902 million.

Falconbridge, for the same 6- month period, reported net earnings of $259 million(C) on revenue of $1.3 billion. Assets totalled $2.6 billion. Long-term debt stands at $584 million.

Trelleborg operates in 30 countries and has a market capitalization of $2.2 billion(C). Sales in 1988 amounted to $3.9 billion. It operates in four main areas: mining and metals, building and distribution, minerals processing systems, and rubber and plastics.

The Swedish company’s mining division, Boliden, recorded sales of $1.3 billion in 1988. Boliden operates 20 mines in Sweden and abroad and produces refined copper, zinc, lead, silver and gold at its copper and lead smelters in central Sweden and its 50%-owned zinc reduction plant in Norway. It is also one of Europe’s leading manufacturers of copper tubing, brass and other semi-manufactured metals and alloys.

In announcing the Amax bid, Falconbridge also reported approval by its directors of a shareholder protection rights plan, or “poison pill,” designed to ward off hostile takeover offers by diluting the shareholding.

Falconbridge reports the waiving of a provision in the rights plan which might have prevented Noranda and Trelleborg from making a “permitted bid” (a bid for all outstanding shares).

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