Brazil’s mining giant Companhia Vale do Rio Doce (CVRD) announces that it intends to make an all-cash offer to acquire all of the outstanding common shares of Canada-based Inco, at a price of US$ 76.00 in cash per Inco common share.
The combination of CVRD and Inco will create one of the three largest diversified mining companies in the world, with leading global market positions in iron ore, pellets, nickel, bauxite, alumina, manganese and ferroalloys, and an exciting world-class pipeline of projects, supported by a large-scale, long-life and low-cost asset portfolio.
Inco is a leading Canadian-based nickel company, and the world’s second largest nickel producer possessing the world’s largest nickel reserve base.
Inco is one of the world’s lowest cost producers of nickel and due to a very attractive pipeline of projects it has the highest growth potential amongst the main global nickel producers.
Inco is also a leader in nickel technology, with a very traditional brand name and premium products for plating, special nickel alloys and superalloys.
In 2005, Inco had revenues of US$ 4.518 billion and net earnings of US$ 836 million. Inco’s total debt as of June 30, 2006 was US$ 1.921 billion.
The acquisition by Brazilian CVRD will be financed through a two-year committed bridge loan facility provided by four large first-tier banks: Credit Suisse, UBS, ABN AMRO and Santander. CVRD expects to take out the bridge facility with a long-term capital package within 18 months after the closing of the proposed transaction.
CVRD expects to formally commence its offer by newspaper advertisement on Monday, August 14, 2006. The offer will be open for acceptance for 45 days following its formal commencement and no Inco common shares will be taken up and paid for pursuant to the offer unless, at such date, each of the conditions of the offer is satisfied or waived.
Completion of the offer will be subject to a sufficient number of shares being tendered to the offer such that CVRD would own at least 66 2/3% of Inco’s common shares, on a fully-diluted basis, following completion of the offer.
The offer will be also conditional upon the receipt of all necessary regulatory approvals, the absence of litigation, no material adverse change at Inco and other customary conditions.
CVRD has not yet held any discussions with Inco’s management with respect to this transaction but says that it would welcome the opportunity to work with Inco to achieve a successful outcome to this transaction.
CVRD Chief Executive Officer, Roger Agnelli said: "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. For Inco shareholders, our all-cash offer provides a very attractive opportunity to realize substantial gains with no exposure to market risks."
The Brazilian company says that the offer is consistent with its long-term corporate strategy and with its non-ferrous metals business strategy.
Benefits to Canada
CVRD states that it is confident that its acquisition of Inco will deliver significant benefits to Canada as a whole including the operations, employees, suppliers and stakeholders of Inco and the Canadian communities in which it operates.
The firm’s management promises that it is committed to continuing to invest in R&D as well as capital projects to maintain the strength of Inco’s current operations in Canada as well as Inco’s continuing mineral exploration effort in Canada with a view to creating shareholder value and supporting the communities where Inco operates.
CVRD is a Brazilian company, headquartered in the city of Rio de Janeiro, Brazil. It is the largest metals and mining company in the Americas and one of the largest in the global metals and mining industry, with a market capitalization of approximately US$ 55 billion. It is rated BBB+ by Standard & Poor’s, BBBhigh by Dominion Bond Rating Service, Baa3 by Moody’s and BBB- by Fitch Ratings.
It is the largest global producer of iron ore and pellets, the world’s second largest producer of manganese and ferroalloys, one of the world’s lowest cost producers of aluminum products (bauxite, alumina and primary aluminum) and a producer of copper, potash and kaolin.
CVRD is the largest logistics player in Brazil, owning and operating three railroads and eight maritime terminals along the Brazilian seacoast.
CVRD has been investing in a large growth pipeline, involving greenfield and brownfield projects in iron ore, pellets, bauxite, alumina, potash, copper, nickel and coal. Simultaneously, they are investing in a global multi- commodity mineral exploration program in South America, Africa, Asia and Australia.
Their shares are traded on the New York Stock Exchange – NYSE (RIO and RIOPR), on the Sao Paulo Stock Exchange – BOVESPA (Vale3 and Vale5) and on Latibex (XVALP and XVALO).
CVRD’s financial advisors in this transaction are Credit Suisse, UBS, ABN AMRO and Santander. Its legal advisors are Stikeman Elliott LLP in Canada and Cleary, Gottlieb, Steen & Hamilton LLP in the United States.
Show Comments (0)