Teck makes all-Canadian bid for Inco

Teck Cominco's experience operating northern mines like Red Dog and Pogo in Alaska could serve it well if the Vancouver-based company's C$17.8 billion attempt to take over Inco is successful. Toronto-based Inco is the world's second-largest nickel producer and its properties include Voisey's Bay mine in Labrador. Inco is currently trying to acquire another Toronto-based mining company, Falconbridge, and the Teck Cominco offer for Inco is contingent on the bid for Falconbridge failing.

Touting its offer as "A Better Deal," Teck Cominco hopes that Inco shareholders will prefer to receive C$78.50 per share in cash or shares - a premium of 27.8 percent on the 30-day volume weighted average price of the shares as of May 5 - instead of paying a premium for Falconbridge shares and waiting on a takeover bid that has already been in the works for several months.

In response, Inco improved its offer to Falconbridge, increasing it by C$5 per share to C$51.17 per share. "This is the right deal with the right company," said Falconbridge CEO Derek Pannell. "The mining world has long understood that Inco and Falconbridge are logical partners and this has only been underscored by the improved metals market environment."

Deal discussed last year

Teck Cominco discussed a possible deal with Inco last year, before Inco made its bid for Falconbridge in October. Inco's nickel projects could benefit from the use of Teck Cominco's patented hydrometallurgical technology, according to Teck Cominco President and CEO Don Lindsay.

"Teck Cominco is recognized for its commitment to the principles of sustainability," Lindsay said at a press conference to discuss the takeover bid May 8. "Its leadership in building relationships with aboriginal communities is well-demonstrated at its Red Dog mine in northwestern Alaska. A Government of Canada survey of air emissions from Canadian metal smelters shows that Teck Cominco's Trail operation is amongst the best in the country, and Teck Cominco will bring this experience and commitment to the assets and opportunities provided by the combined company."

In February Teck Cominco reported earnings of C$1.3 billion for 2005, more than double the C$617 million earned in 2004. On May 12, in a further twist to the tale, the company announced that Falconbridge's chief operating officer, Peter Kukielski, would join Teck Cominco as COO in July. Senior Vice President Mike Lipkewich will retire from Teck Cominco after 36 years with the company.

After Teck Cominco announced its bid for Inco, Switzerland's Xstrata joined the fray by making a hostile takeover bid for Falconbridge. Xstrata had already bought a 19.9 percent stake in Falconbridge last August for C$2 billion. Now it is offering C$16.1 billion for the Canadian company's remaining shares. "I don't believe that the C$52.50 cash price per share proposed by Xstrata reflects the full and fair value of Falconbridge shares, given its current earnings prospects," Falconbridge CEO Pannell said. The offer from Xstrata was below Falconbridge's share price at the time of C$54, but slightly higher than Inco's offer.