Snubbed in its second attempt at talking a hostile bidder into sweetening its bid, takeover target Inco (N-T, N-N) has reaffirmed its support of a friendly deal to be acquired by Phelps Dodge (PD-N).
After initially coming out “neutral” on an $86-per-share hostile bid from Companhia Vale do Rio Doce (CVRD) (RIO-N), Inco approached the Brazilian iron ore giant to see if it was willing to improve its offer to make it a “superior proposal” to that of Phelps.
CVRD balked at the talks, as did Teck Cominco (TCK.A-T, TCK-N) when approached in mid-August. Teck recently bowed out of the battle for Inco after failing in an ambitious plkan to raise $5.7 billion overnight to allow it to boost its bid to $89 per share, including at least $71.20 in cash.
Inco’s recommendation to reject CVRD’s bid comes just more than a week before its shareholders are set to vote on the proposed transaction with Phelps. That vote is slated for Sept. 7; Phelps’ shareholders will have their say on Sept. 25. Some of Phelps’ major shareholders have consistently said they plan to vote against the scheme, as it is too dilutive and debt-laden.
Phelps’ plan to acquire all of Inco’s outstanding shares for $20.25 in cash plus 0.672 of one of its own shares still requires approval by Investment Canada. That approval will take up to another 30 days after the regulator said it needed more time to fully review the scheme. The extended review period began on Aug. 21; Phelps’ plan has already faced 45 days of examination.
CVRD’s offer is also subject to approval by Investment Canada. The Brazilian figures it should pass muster, as its operations are complementary to Inco’s, and it currently does not produce any nickel.
Phelps’ offer valued Inco shares at around $84.75, based on Phelps’ share price of US$86.32 in afternoon trading in New York following the news on Aug. 29. Shares in Inco were off 39 at $85.71 in Toronto, while CVRD was off US12 at US$21.16 in the Big Apple.
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