Phelps Dodge in a $40 B Deal

Elena
26 Jun, 2006
New York City

As part of the deal, Phelps Dodge will initiate a share buyback program of $5 billion. The final deal is expected to close in September, with Phelps Dodge shareholders owning about 40% of Phelps Dodge Inco, current Inco shareholders owning about 31%, and current Falconbridge holders owning about 29%.

[R]8:00AM Phelps Dodge agreed to buy mining companies Inco and Falconbridge.[/R]
One of the largest copper producers in the world, Phelps Dodge Corp.((PD)), announced Monday it is buying Canadian mining companies Inco Ltd. ((N)) and Falconbridge Ltd. ((FAL)) for $40 billion in a cash and stock. As part of the deal, Phelps Dodge will initiate a share buyback program of $5 billion. The final deal is expected to close in September, with Phelps Dodge shareholders owning about 40% of Phelps Dodge Inco, current Inco shareholders owning about 31%, and current Falconbridge holders owning about 29%. The companies forecast combined annual cost savings of $900 million by 2008. The deal would also add to earnings from 2008 onward.

The new company, to be called Phelps Dodge Inco Corp., is expected to be the world''s biggest nickel producer and largest publicly traded copper producer. Under the terms of the agreement, Inco shareholders will receive 0.672 shares of Phelps Dodge stock plus 17.50 Canadian dollars ($15.59) per share in cash for each share of Inco stock, representing a premium of 23% to Inco''s closing price on June 23. Simultaneously, Inco will increase its previous offer for Falconbridge to 17.50 Canadian dollars ($15.59) from 12.50 Canadian dollars ($11.14) and the exchange ratio to 0.55676 shares of Inco, from 0.524 shares, for each share of Falconbridge.


[R]7:30AM Asian stocks close mostly higher on merger activity.[/R]
Asian markets closed mostly higher. Japan''s major indexes inched higher in late afternoon after having been lower most of the day. Led by domestic demand-sensitive issues such as banks and real-estate developers, the Nikkei 225 Index advanced 0.19% to close at 15152.40. Investors grabbed large industrial issues on expectations the companies could become targets in the consolidation wave. Mitsubishi Heavy Industries rose 1.7%, while Kawasaki Heavy Industries advanced 3%. Sumitomo Metal Industries gained 2.2%. Japanese financial shares declined, though, with Resona Holdings shedding 1.7%. Consumer finance firm Aiful, consumer lender, fell 2.5%. South Korean shares closed higher bouncing back as leading exporters, including information and technology companies, rallied on positive corporate news and in anticipation of improved earnings after the second quarter. The Korea Composite Stock Price Index, or Kospi, gained 0.8% to 1238.05. Taiwan shares also finished higher on bargain hunting. The Taipei Index advanced 1.1% to 6523.68. In Hong Kong, stocks closed little changed Monday as investors stayed on the sidelines anticipating the expiry of June index futures later this week, but telecommunications operator PCCW outperformed on the prospect of its asset sale. The Hang Seng Index slipped 0.03% to 15804.81.


[R]6:30AM Mittal and Arcelor deal lifted Europe.[/R]
European markets traded higher in mid-morning. The U.K. FTSE 100 index rose 0.2% at 5,701, the German DAX Xetra 30 index advanced 0.2% at 5,543, and the French CAC-40 index gained 0.2% at 4,827. On the corporate front, Mittal Steel and Arcelor deal drew early attention on the steelmaking sector after the companies agreed to an improved offer on Sunday night. The new business, to be called Arcelor Mittal, will have an annual output of more than 100m tonnes of steel. Germany''s ThyssenKrupp advanced 1% and Anglo-Dutch Corus Group rose 1.6%. Diversified mining stocks such as BHP Billiton and Rio Tinto also gained, following a report in The Wall Street Journal stated that Phelps Dodge is set to make a $40 billion bid for Canadian miners Inco and Falconbridge.

Oil inched down on Monday, following signs of improved Iraqi production, but kept near $71 a barrel as demand from the United States and China is still growing despite near-record prices while traders are concerned about supply disruptions. Crude traded down 7 cents at $70.80 a barrel by 0436 GMT, after an increase of 3 cents on Friday that took gains for last week to 1.4%. London Brent crude shed 8 cents to $69.85. The euro opened up against the dollar on Monday, pushing back the U.S. currency from a rally it staged late last week. The euro purchased $1.2566, up from $1.2515 in New York late Friday. The British pound slipped against the dollar, purchasing $1.8237, down from $1.8281 in late trading last week. The dollar was stronger against the Japanese yen, purchasing 116.25, up from 116.08 in New York at the end of last week.