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Inco recommends friendly Phelps Dodge offer

Erman, Boyd

2006

Overview

If more than a third of Inco shareholders ignore the recommendation and turn down the Phelps deal in a vote scheduled for Sept. 7, Inco will instead pay only $125 million US and will then be free to make an all-out three-week push for a higher bid before CVRD's offer expires on Sept. 28. Only if another bid for Inco succeeds within the next 12 months would Inco have to pay a further $350 million USto Phelps Dodge. Inco was bound by its agreement with Phelps Dodge to recommend the Phelps Dodge offer unless CVRD made a \"superior\" bid. While many shareholder prefer the all-cash option, Inco's board pointed to the similar per-share values of the two bids and demanded that CVRD raise its offer. Starting friendly negotiations with Inco would require signing confidentiality agreement that comes with a stringent 12-month \"standstill\" clause, said people familiar with the negotiations. That would prevent CVRD from pursuing any bid that didn't have the backing of Inco's board, enabling Inco to hold CVRD ransom for a higher price with the knowledge CVRD could no longer try a hostile bid.

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