Inco we trust

14 May 2006 By Rob Cox Follow @rob1cox

The Canadian miner sweetened its offer to nearly $18bn and raised its breakup fee a day before the shackles come off Xstrata. This is clearly a defensive gambit to thwart Xstrata and scuttle Teck’s hostile $16bn offer. But shareholders may question the logic.

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Inco and Falconbridge on Saturday reached an amended merger agreement that will see Inco's offer raised by $4.50 (C$5) a share in cash to $46.12 per share. The share component of the consideration remained unchanged.

The enhanced terms reflect the change in metal market dynamics and the additional value created in Falconbridge because of higher metal prices, said Scott Hand, chairman of Inco in a statement.

Under the terms of the revised support agreement, Inco will offer $46.12 in cash or 0.6927 of an Inco common share plus $0.045 in cash for each Falconbridge common share. Under the terms of this offer, the maximum amount of cash to be paid by Inco will be approximately $4.3bn, and the maximum number of Inco shares to be issued will be approximately 201m, taking into account the conversion of Falconbridge's outstanding convertible debt securities and outstanding share options.

The revised support agreement also provides for the payment of a fee of up to $450m, from $320m to Inco by Falconbridge in the event that the acquisition is not completed for the reasons set forth in the original agreement

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