This column was originally published in Northern Life, Greater Sudbury’s community newspaper on August 16, 2006
Combined assets of CVRD and Inco would create the third-largest mining company in the world
Like most other analysts and columnists who have been following this nickel soap opera, we were all collectively given a sucker punch out of nowhere by the Brazilians!
Last Friday, Brazilian iron ore king, Companhia Vale do Rio Doce (CVRD) made an all-cash offer to buy Inco Limited at the price of CDN$ 86.00 per share. The offers of both Teck-Cominco and Phelps Dodge are a mix of cash and share. The hedge fund boys and girls dance with delight with all cash offers as these always trump any cash/share combination and give maximum short term gain.
In addition, Atticus Capital, a large American hedge fund that owns about eight percent of Phelps Dodge does not support the merger with Inco and will recommend shareholders to vote against this deal. If there are no regulatory hurdles, this does appear – notice my hedging – to be a knock-out punch.
Roger Agnelli, chief operating officer of CVRD said in a statement, “This is an exciting opportunity for CVRD. The operations of the two companies are complementary and the combination will enhance our capabilities to benefit from the fast changing global landscape in the metals and mining industry.”