Wednesday, September 06, 2006

Inco & Phelps Dodge cancel the merger

Nickel giant Inco Ltd and Phelps Dodge agree to terminate the
Combination Agreement the parties entered into on June 25, 2006. Inco also
announced that it has cancelled the special meeting of Inco shareholders
called for September 7, 2006.

PT Inco Tbk, a subsidiary of Inco Ltd, with shares floating at Jakarta Stock Exchange (JSX). Inco shares price closed higher 4% on Wednesday trading at Rp23,050 or market capitalization of US$2.5 billion. Inco Ltd is the largest shareholder with 60.8%, followed by Sumitomo Metal Mining 20.09%.
According to Inco's statement to Toronto Stock Exchange on Wednesday, Sept 5, Inco will pay Phelps Dodge a termination fee of US$125 million today and a further US$350 million if Inco consummates an alternative take-over bid or similar transaction on or prior to September 7, 2007. Inco would have paid
these same amounts had the agreement been terminated after Inco shareholders
failed to approve the Phelps Dodge transaction at the special meeting.
Scott Hand, Chairman and Chief Executive Officer of Inco, stated: “It was
very clear from the proxies we received that Inco shareholders were not
going to support the Phelps Dodge transaction, so the two companies agreed
that it was in our respective best interests to move on.”
Following the termination of the Combination Agreement, Inco is no longer
restricted in its ability to solicit acquisition proposals from, provide
confidential information to or enter into negotiations or agreements with
interested parties concerning potential value enhancing alternatives. The
Board has authorized Inco’s senior management and its advisors to explore
these alternatives consistent with the company’s commitment to maximize
value to Inco shareholders. Inco also continues to be open to entering into
discussions or negotiations with Companhia do Vale Rio Doce (CVRD) with
regard to its offer of August 14, 2006.
Brazil's CVRD US$17.5 billion in cash for Inco while the merger value was predicted at US$17.7 billion.

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