Inco extends its bid, Xstrata gets EC nod

Inco (N-T, N-N) has extended its friendly cash-and-share bid for Falconbridge (FAL-T, FAL-N) by 11 days. The unsweetened bid now expires at midnight Pacific time on July 24.

Inco made the move just hours before the bid was set to expire. The nickel miner said that while its bid had received a “growing number” of acceptances, it did not expect the number to meet its minimum tender condition of at least two-thirds of Falconbridge’s outstanding shares by the July 13 deadline.

Inco’s extension came hours after the European Commission approved Xstrata‘s (XSRAF-O, XTA-L) competing bid for the 80.2% of Falconbridge shares it doesn’t already own.

Said the commission in a prepared statement: “After examining the operation, the commission concluded that the transaction would not significantly impede effective competition in the European economic area or any substantial part of it.”

The regulator concluded that the proposed union would result in limited overlap in the mining, processing and sales activities of Falconbridge, Xstrata and major Xstarta shareholder Glencore International. Glencore owns a 14.3% stake in Xstrata.

Xstrata’s recently sweetened $59-per-share bid still requires approval by Investment Canada. Such approval could take until early August after the regulatory body recently decided it need more time to fully consider the implications of Xstrata’s hostile bid.

Xstrata’s bid expires on July 21; the Swiss-based miner says it is confident that it will receive the necessary clearance under the Investment Canada Act. Inco’s bid was approved by the EC on July 4.

Based on its closing share price of $74.93 in Toronto on July 13, Inco’s bid held a slight 22 edge over the Xstrata cash bid. Still, investors pushed Falco’s shares 4 higher to $60.79 in anticipation of a sweetener from Inco.

That sweetener might still come; Inco can amend its existing bid up to 10 days before expiry. Thereafter, it would have to further extend the offer to accommodate any changes.

In any case, the battle should see more sparks by July 28, that’s when Falconbridge’s shareholders’ rights plan expires. The plan currently prevents Xstrata from picking up additional Falco shares on the open market, as doing so would trigger a massive dilution of its existing 19.8% stake, and make acquiring the remaining outstanding shares prohibitively expensive. Once the poison pill expires, Xstrata can freely acquire shares, and amass a stake large enough to block Inco’s bid.

Falconbridge said its board is reviewing both revised offers.

Shares in Falconbridge were off 11 at $60.65 in morning trading in Toronto following the news on July 14; Inco was 22 cheaper at $74.71. In London, Xstrata was down 7 pennies to 2,080 pence.