Inco eyes summer wedding

Inco (N-T, N-N) has for a third time extended its friendly takeover bid for Falconbridge (FAL.LV-T, FAL-N), this time by four months to the end of June.

The extension is designed to give competition authorities in the U.S. and Europe time to complete their review of Inco’s proposed $12.8-billion plan to create the world biggest nickel producer. Canadian regulators approved the plan earlier this year.

In a recent conference call with analysts and investors, Inco chief executive Scott Hand said he hadn’t seen anything in meetings with either the U.S. Department of Justice or the European Commission to indicate that the deal would not be completed.

Pointing out that more than 9 million pages of documents relating to mining operations all the way down to refining have been delivered to the Department of Justice, he said the review processes for such a large transaction would take time.

“We believe, and we’ve indicated to both agencies, that the combination of our two companies does not give rise to any competition issues since market forces would prevent this from happening,” Hand said during the call.

He said both regulatory bodies are currently working to understand the market and determine first if a remedy is required, and second, if the previously proposed divestiture of Falco’s Nikkleverk refinery in Norway would fit the bill.

Hand said such a divestiture would result in the creation of a “viable competitor to the new Inco.” Still, he maintains “we do not need a remedy,” and says divesting of Nikkelverk would not automatically expedite regulatory approval.

Hand said the Department of Justice is further along in its review, and that a decision could be handed down within the next two months. Meanwhile, the European Commission is first looking at markets and other key factors before it moves on to considering competition concerns, which can involve an optional second phase lasting up to 90 business days. The first phase was scheduled to end on Feb. 24; a second phase could run into early August, which would mean another bid extension.

The key concern of both regulators is the position the combined entity would have in the high-grade nickel market. Such nickel is used in superalloys, which are employed in high-tech products like the rotating parts of jet engines, and in the nickel plating market.

Hand said there is plenty of competition in both markets, and that there are “lots of companies that could qualify to provide their nickel for these alloys if they wanted to.”

He added: “The amount of nickel used in superalloys for critical rotating parts is very small, less than one per cent of the total demand for primary nickel.”

Inco is offering $34 in cash or 0.6713 of one of its own shares accompanied, fittingly, by a nickel for each of Falconbridge’s outstanding shares. The cash portion of the offer is capped at $2.87 billion and the share issuance is limited to 201 million shares.

“Our offer is one hell of an offer; it’s reflected in the marketplace as being one, and it’s one we’re going to stick with. There is no one that can bring on the synergies that we can,” Hand said. “Its worth waiting for.”