With the writing on the wall, Inco (N-T, N-N) has agreed to drop its shareholders’ rights plan effective at the end of business on Aug. 16, after reaching an agreement with Teck Cominco (TCK.B-T, TCK-N).
The move means a hearing of Teck’s appeal of the plan before the Ontario Securities Commission scheduled for today will not take place. Teck had sought to have the plan terminated on the grounds it was redundant, as an auction for Inco is already under way.
The deal with Teck came just a day after Phelps Dodge (PD-N) and Inco balked at boosting their offer for Falconbridge (FAL-T, FAL-N) in the face of a freshly increased competing offer from Xstrata (XSRAF-O, XTA-L).
Xstrata’s latest cash bid of $62.50 is widely expected to win the battle for Falco, especially with Phelps’ three-way plan to swallow Inco and Falconbridge facing significant shareholders resistance. Xstrata’s all-cash offer is expected to be particularly attractive to the hedge funds that hold a significant portion of Falco’s shares. The bid still needs approval by Industry Canada, and Xstrata’s shareholders.
If Inco does lose, the termination of its rights plan is expected to beget an all-out bidding war for the world’s second-largest nickel producer. The cast of usual suspects includes major players Companhia Vale do Rio Doce (CVRD), Anglo American (AAUK-Q, AAUKF-O, AAL-L) and Rio Tinto (RTP-N, RTOLF-O, RIO-L). Mining behemoth BHP Billiton (BHP-N, BHPBF-O, BLT-L) would probably not enter the fray as its sizeable nickel portfolio would be sure to raise competition concerns.
Teck has stood by its offer of $28 in cash accompanied by 0.6293 of a class B subordinate voting share for each Inco share since launching it in early May. The bid rings in at $70.76, based on Teck’s closing share price on July 20. The offer is contingent on Inco scrapping its planned nuptials with Falconbridge. Phelps’ competing offer for Inco of $20.25 in cash plus 0.672 of one of its own shares amounts to $79.72.
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