Nickel merger chiefs don’t expect rival bid

Inco, Falconbridge synergies cited Mining CEOs say plan has wide support

With six weeks left on Inco Ltd.’ s takeover offer for Falconbridge Ltd., the chief executives of both mining giants say they can’t picture another bidder stopping the creation of a Canadian powerhouse of nickel and copper mining.

“ I just find it hard to see how anyone else can do that,” Inco chief Scott Hand said after his speech on the proposed merger yesterday at the Empire Club. And since the takeover offer was announced a month ago, Hand said he’s never seen so much support from investors and stakeholders for anything in his 32- year career at Inco.

“ We’ve had very good reception from the Inco shareholders and, more importantly, the Falconbridge shareholders.”

Falconbridge chief executive Derek Pannell, who was also at Le Royal Meridien King Edward Hotel, agreed that after a month of investor presentations across Canada, the U. S. and Europe, there’s been “ virtually no dissent” from shareholders of either company.

“ I think it’s very difficult to assail,” he said. There’s been “ no pushback really” from the investment community and at least qualified support from the unions.

Still, speculation persists that Swiss miner Xstrata PLC, which owns 20 per cent of Falconbridge shares, may make an 11th- hour hostile bid for the rest of the Toronto- based company since it’s had designs on it for some time. Hand refused to comment on whether Inco would increase its offer of $34 in cash, or 0.67 of an Inco common share plus 5 cents for each Falconbridge common share, if another suitor appeared. The Inco offer expires on Dec. 23. But he noted he doesn’t think it would be “ financially rational” for another company to believe it could achieve synergies better than the $350 million annually as estimated in the friendly IncoFalconbridge plan.

“ We’ve put together a great offer. It’s unique. Nobody can add value, with the coming together of the two companies, like we can,” he said.

His Falconbridge peer agreed. “ If someone else comes in, not only do they have to beat the price but they also have to deliver on the synergies that we’ve got, so that’s tough,” said Pannell, who would become president of the new Inco under Hand, who is to remain chief executive. The new company would be the world’s largest nickel miner, churning out an estimated 735 million pounds annually, with forecasts of 1 billion pounds by 2009. It would mine about 1.33 billion pounds of copper yearly at first, rising to an estimated 2.4 billion pounds in 2009.

Pannell noted it’s “ in vogue” now for mining companies with deep pockets to gobble up one another during this super- hot metals market. He cited as an example Barrick Gold Corp.’s recent offer to buy Placer Dome Inc. Hand pointed out that mining companies represent 10 per cent of the TSX’s total market capitalization.

“ We have something that the Chinese need very badly, which is nickel,” said Hand. He reported that Inco’s sales to the “hungry dragon” totalled $400 million ( U. S.) last year. Hand told the audience that they can expect the new Inco to become a reality by early next year.

“ My job is to complete this deal and that’s what we’re doing,” he said, noting planning of the merger is underway.

“We’re moving right along,” Hand said. You can’t take any action, other than some preliminary planning, until the acquisition is complete, he said.