Xstrata Nears $17 B Buyout of Falconbridge

Elena
15 Aug, 2006
New York City

After a year-long bidding war with Inco Ltd., Xstrata said it succeeded in taking control of Falconbridge. In accordance with its plans, Xstrata extended its revised all-cash C$62.50 a share offer until Aug. 25 to ensure full control of Falconbridge after its shareholders approved the tie-up on Monday.

[R]8:00AM Xstrata is on the verge of acquiring Falconbridge for $17.05 B.[/R]
Swiss miner Xstrata PLC is close to the completion of its $17.05 billion acquisition of Falconbridge Ltd. after securing 92.1% of the Canadian nickel and copper miner Tuesday. The merger is expected to bring greater commodity and geographic diversification, resulting in lower cost of capital for the combined group. After a year-long bidding war with Canada's Inco Ltd., Xstrata said it succeeded in taking control of Falconbridge. Falconbridge rejected Xstrata's initial C$52.50 a share offer, preferring local rival Inco, which withdrew after Xstrata raised its bid offer in July.

In accordance with its plans, Xstrata extended its revised all-cash C$62.50 a share offer until Aug. 25 to ensure full control of Falconbridge after its shareholders approved the tie-up on Monday. If Xstrata doesn't take 100% control of Falconbridge by Aug. 25, the company will have to extend the offer again or undertake a compulsory acquisition of the outstanding shares that it doesn't own which would take up to 30 days under Canadian law.

Investec upgraded its recommendation on Xstrata to ‘buy’ from ‘hold’ with a price target of £26 ($49.09), noting that on a pro-forma basis for the combined entity that there is upside of around 18% on the share price. In midday trading, Xstrata's shares were down 1.4% at £21.89 in a broadly lower U.K. market.


[R]7:30AM Japanese stocks fall despite strong machinery gains.[/R]
Asian markets were mixed on Tuesday. The Nikkei 225 Average in Tokyo closed the day down 0.26% to 15,816.19, a day after a 1.9% rally during a power outage. Komatsu was up 2.6% and Kubota advanced 1.3% as stronger-than-expected machinery-order data released last week continued to lift industry stocks. Nippon Oil slipped 1.7% and Showa Shell Sekiyu was off by as much as 2.7%. Sony Corp. lost 0.4% on news that computer maker Dell Inc. was recalling more than four million laptop batteries containing Sony components.

In Hong Kong, the Hang Seng index shed 0.09% to 17,274.07. Developers performed well in Hong Kong. Henderson Land was up 1.1% and New World Development advanced 1.3%. The Shanghai Composite in China moved up 1.6% following a local newspaper reporting that regulators may allow insurance companies to invest a larger portion of their assets in stocks. Australia''s S&P/ASX 200 index closed at 4,936, down 0.71%. BHP Billiton sank 1.1% and oil producer Woodside Petroleum was off 3%.


[R]6:30AM European markets fall by mid-morning on profit taking.[/R]
Euroepan markets were lower by mid-morning on Tuessay. The FTSE 100 in London fell 0.3% to 5,855.3, while Xetra Dax in Frankfurt fell 0.3% to 5,675.72, while in Paris, the CAC 40 shed 0.1% to 5,041.85. Atlas Copso, the Swedish engineer company, fell 1.5%, while Xstrata, the London-listed miner, shed 1.4%.

Drugs stocks offered the market some support. Britain''s Shire led the gainers, climbing 5.3%, Sanofi-Aventis gained 1.4 % after it said on Monday that along with US partner Bristol-Myers Squibb, it had requested a preliminary injunction to halt sales by Apotex of a generic form of their Plavix anti-clotting treatment. Dutch chemicals group, Akzo Nobel, rallied 3% after it said it was seeking shareholder approval to spin off its pharmaceuticals operations and float up to 30 per cent of its Organon Biosciences unit.

Oil prices continued to fall Tuesday as the market responded to a nearly day-old cease-fire in Lebanon. Light sweet crude oil for September delivery fell 28 cents to $73.25 a barrel, while September Brent at London''s ICE Futures exchange shed 35 cents to $73.95 a barrel. The U.S. dollar was trading at 116.48 yen, down from 116.67 yen late Monday in New York. The euro rose to $1.2746 from $1.2719.