Phelps Dodge to buy 2 cos for $40bn

NEW YORK: Phelps Dodge has agreed to acquire nickel miners Inco and Falconbridge in a $40bn transaction, two reports said on Monday, citing people familiar with the deal. Phelps Dodge will acquire Inco, which would sweeten an existing C$19bn offer for Falconbridge, The New York Times said. Both Inco and Falconbridge are Toronto based.

The Wall Street Journal said that the boards of all three companies have approved the transaction. The new company, which would be the largest mining company based in North America, is expected to be called Phelps Dodge Inco, with headquarters in Phelps’s hometown of Phoenix, it said. The deal will end a year-long battle over Inco and Falconbridge.

Phelps Dodge is swooping in as the white knight to keep Inco and Falconbridge from its other suitors and to satisfy a growing chorus of investors that have contended the Inco-Falconbridge deal shortchanged its shareholders.

The deal, which comes a day after European steelmaker Arcelor bowed to an improved e25.6bn ($32.2bn) takeover bid from Mittal Steel, is expected to be announced on Monday, the two newspapers said. Phelps has agreed to pay large premiums for both Inco and Falconbridge, suggesting Phelps expects metals prices to stay high for a long time.

Inco is expected to raise its offer for Falconbridge to around C$54 a share, adding C$5 a share in cash and about C$2 a share more in Inco stock, the Journal said. Inco shareholders will gain a premium of almost 23%, and Falconbridge shareholders a premium of nearly 12%, it said.

North American regulators have approved the deal, but it must be approved by European authorities. Mining and other commodity-related companies are seeking to merge to take advantage of the enormous economies of scale involved in the mining and processing of metals.