Xstrata poised to clinch Falconbridge deal

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The Independent Online

Xstrata looks set to win the battle for the Canadian mining company Falconbridge after its main rival Inco pulled out of the bidding process, paving the way for Xstrata to complete the C$18.1bn (£8.6m) deal.

The Anglo-Swiss mining group Xstrata will now push ahead with its hostile bid for the nickel and copper miner and urged Falconbridge shareholders to accept its cash bid.

Xstrata already owns 20 per cent of Falconbridge and has been determined to complete the buyout despite the Canadian company recommending the rival Inco bid.

Toronto-based Inco dropped its cash-and-share bid after it failed to win the backing of Falconbridge shareholders. Without detailing the level of support it had received, Inco said that less than 50.01 per cent of 382 million Falconbridge shares were tendered in support of its offer. As a result, Inco did not elicit the required level of support. If Xstrata succeeds in buying Falconbridge, the Canadian company will be liable to pay a break fee of up to C$450m to Inco.

Mick Davis, Xstrata's chief executive, said: "We welcome the fact that Falconbridge shareholders have acted decisively in rejecting the Inco offer and we urge them now to tender to Xstrata's all-cash offer."

Inco's decision to drop its bid for Falconbridge ends a tug-of-war that embroiled five separate mining companies. Inco is itself subject to a hostile takeover approach from Vancouver-based Teck Cominco. Meanwhile, the American miner Phelps Dodge had agreed to buy the combined Inco and Falconbridge business for $40bn (£21.5bn).

A successful completion of the deal will provide some relief to Mr Davis after Xstrata's hostile bid to takeover WMC Resources failed last year. Falconbridge shareholders have until 14 August to tender their shares and Xstrata has the right to purchase up to 5 per cent of the target company's shares prior to that date.

Xstrata will hold an extraordinary general meeting to approve the takeover on 14 August and already has approval from 36 per cent of shareholders.

The Falconbridge deal will add nickel production to the Anglo-Swiss company's copper and coal mining assets. Xstrata said the merger would be substantially earnings enhancing and cash flow accretive in the first year after acquisition. Xstrata shares gained 7.5 per cent to 2,301p as a result of Inco's pull-out.