Xstrata launches £8bn Falconbridge bid
Thursday 18 May 2006
The Anglo-Swiss miner Xstrata has mounted a hostile bid for the Canadian nickel miner Falconbridge, offering C$16.1bn (£8bn) in cash for the 80 per cent of the company it does not already own. The deal would create the world's fifth-largest mining company and bolster Xstrata's metal portfolio.
Xstrata's bid was widely anticipated by the financial markets. Falconbridge has agreed to a merger with the Canadian miner Inco but Xstrata's hostile bid of C$52.50 a share values Falconbridge at C$20bn, which trumps Inco's agreed bid for its local rival.
Earlier this week, Inco raised its bid for Falconbridge to C$19.6bn and also upped the break fee if the deal does not proceed to C$450m.
Xstrata paid Brookfield Asset Management C$28 a share for a 20 per cent stake in Falconbridge in 2005. Xstrata agreed that if it bought out the rest of the company at a higher price, it would pay Brookfield the difference. That agreement lapsed earlier this week, paving the way for a bid.
Xstrata has grown rapidly since Mick Davis took over as chief executive four years ago. Mr Davis, 46, has turned the company from a Swiss mid-cap stock into a global mining giant that competes against the likes of Rio Tinto, BHP Billiton and Anglo American. After losing out on the Australian company WMC last year, Xstrata has been waiting to pounce on Falconbridge. Xstrata has little to lose - if it is outbid, it will make a larger profit on its stake.
The deal exposes Xstrata to nickel production as the Anglo-Swiss company predominantly mines copper and coal. Xstrata said the merger would be substantially earnings enhancing and cash flow accretive in the first year after acquisition.
Xstrata is also placing up to 62 million shares to pay back debt it raised to fund its purchase of the Falconbridge stake and a coal operation in Colombia.
Xstrata could still face competition from Inco, which received a hostile bid of C$17.8bn from the Vancouver-based Teck Cominco last week. Teck's bid stipulates that Inco drop its takeover offer for Falconbridge. Subsequently, Inco raised its bid for Falconbridge.
Falconbridge supports Inco's offer, describing it as the "right deal with the right company". However, the merger has already been delayed three times as Inco has struggled to gain regulatory approval for a merger that would create the largest nickel producer in the world.
Inco may also struggle to match Xstrata's higher price. John Meyer, an analyst at Numis Securities, said: "We believe that Inco will be unable to counter the bid." He added that it would also be difficult for another party to enter the bidding war given Xstrata's large stake. Xstrata can also justify a higher bid as it can reduce the effective tax rate on Falconbridge's cash flows because it is based in Switzerland, Mr Meyer said.
- 1 Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 The secret report that helps Israel hide facts
- 4 Israel's propaganda machine is finally starting to misfire
- 5 'Hello mum, this is going to be hard for you to read ...'
Sally Farmiloe dead: Howards' Way actress, and former mistress of Jeffrey Archer, dies aged 60
Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
Pope Francis issues top 10 tips for happiness – including don’t try to convert other people
Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
Justin Bieber posts Instagram photo of Orlando Bloom crying after Ibiza fight 'over Miranda Kerr'
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...