updated 10/11/2005 12:09:09 PM ET 2005-10-11T16:09:09

Inco Ltd. has agreed to pay nearly $11 billion in cash and stock for Falconbridge Ltd. in a deal between two of Canada’s top mining companies that will form the world’s largest nickel producer.

“This is one of the greatest acquisitions in the metals and mining industry and one that many people have long thought should see the light of day,” Inco president and CEO Scott Hand told a conference call Tuesday after the deal was announced. Hand will remain as CEO.

A bigger Inco “will be one of the world’s premier mining and metals companies in both nickel and copper, with one of the mining industry’s most attractive portfolios of low-cost, profitable growth projects,” the companies said.

Under terms of the deal, Falconbridge shareholders will receive 0.6713 Inco shares, a cash payment or a combination of shares and cash valued at 33.94 Canadian dollars ($28.80) for each Falconbridge share they own.

With 369 million shares of Falconbridge outstanding, the deal is worth about 12.5 billion Canadian dollars ($10.6 billion)

The offer represents a 9 percent premium over Falconbridge’s closing price of $26.41 Monday on the New York Stock Exchange.

Inco is the world’s second largest producer of nickel, which is used primarily for manufacturing stainless steel and batteries. Falconbridge is one of the world’s top miners and smelters of copper and nickel. The companies estimated their combined nickel production for 2005 to 735 million pounds, which is forecast to grow to one billion pounds by 2009.

“The new Inco will not only be the leading nickel producer with an excellent copper position it will have solid operating foundations a marketing network in over 40 countries and a strong financial position,” said Derek Pannell, CEO of Falconbridge who would become president of the combined company.

Its combined copper production is forecast at 1.33 billion pounds this year and is expected to increase to about 2.4 billion pounds in 2009.

The companies said the acquisition should lead to annual savings of $350 million per year by the end of 2007. The boards of both companies have approved the deal. The deal is still subject to shareholder approval.

The maximum amount of cash to be paid by Inco will be about 2.87 billion Canadian dollars ($2.4 billion), and the maximum number of Inco shares to be issued will be 201 million.

Pannell said Falconbridge shareholders would have significant ownership at 46 percent in the new Inco on a fully diluted basis.

With extensive operations in North and South America, Asia, the South Pacific and Europe, the new firm would represent combined revenues of $6.4 billion for the six months ended June 30.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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