Saturday, August 20, 2005
Canadian Mining Deal Prompts Discussion of a Takeover - New York Times
Canadian Mining Deal Prompts Discussion of a Takeover - New York TimesAugust 16, 2005
Canadian Mining Deal Prompts Discussion of a Takeover
By IAN AUSTEN
OTTAWA, Aug. 15 - The purchase of just under 20 percent of Falconbridge, Canada's largest mining company, by the Swiss coal producer Xstrata on Monday led to immediate speculation that it would move to take control of the company.
Xstrata has agreed to pay Brascan, a Canadian investment company, 2.05 billion Canadian dollars ($1.71 billion) for a 19.9 percent holding in Falconbridge, which is based in Toronto, putting it just under a Canadian legal threshold requiring a bid for all outstanding shares.
"I think it's a fairly good guess that they aren't buying this to hold a 20 percent stake," said Greg Barnes, a base metals analyst with Canaccord Capital in Toronto. "This deal effectively blocks anyone else out."
In a conference call with analysts, Xstrata's chief executive, Mick Davis, fueled the speculation about future moves.
"We don't intend to be a long-term investor with a minority interest in the company," Mr. Davis said. However, when asked directly by an analyst if investors should expect a larger play for Falconbridge, he declined to answer.
The share sale marks the end of a sometimes difficult effort by Brascan, which is based in Toronto, to leave mining and concentrate its investments in other sectors, particularly commercial real estate and electric power generation.
Last year, Brascan put its main mining asset, then known as Noranda, up for auction. It reached a preliminary deal with the China Minmetals Corporation in late September. But the Chinese government's control of Minmetals prompted a political outcry in Canada, and the deal fell apart.
Other would-be bidders, including Xstrata, had declined to bid on Noranda because it did not fully own Falconbridge, a leading Canadian nickel producer.
To resolve that issue, Brascan engineered a complex merger between Falconbridge and Noranda that was completed in June. Brascan's holdings in the merged company was 20 percent, compared with its 42 percent stake in Noranda, the larger of the two companies.
The share sale to Xstrata valued Falconbridge at 28 Canadian dollars ($23.40) a share, slightly less than Friday's closing price on the Toronto Stock Exchange. If Xstrata makes an offer for other Falconbridge shares over the next nine months at a higher price, it will pay Brascan the difference.
Canadian Mining Deal Prompts Discussion of a Takeover
By IAN AUSTEN
OTTAWA, Aug. 15 - The purchase of just under 20 percent of Falconbridge, Canada's largest mining company, by the Swiss coal producer Xstrata on Monday led to immediate speculation that it would move to take control of the company.
Xstrata has agreed to pay Brascan, a Canadian investment company, 2.05 billion Canadian dollars ($1.71 billion) for a 19.9 percent holding in Falconbridge, which is based in Toronto, putting it just under a Canadian legal threshold requiring a bid for all outstanding shares.
"I think it's a fairly good guess that they aren't buying this to hold a 20 percent stake," said Greg Barnes, a base metals analyst with Canaccord Capital in Toronto. "This deal effectively blocks anyone else out."
In a conference call with analysts, Xstrata's chief executive, Mick Davis, fueled the speculation about future moves.
"We don't intend to be a long-term investor with a minority interest in the company," Mr. Davis said. However, when asked directly by an analyst if investors should expect a larger play for Falconbridge, he declined to answer.
The share sale marks the end of a sometimes difficult effort by Brascan, which is based in Toronto, to leave mining and concentrate its investments in other sectors, particularly commercial real estate and electric power generation.
Last year, Brascan put its main mining asset, then known as Noranda, up for auction. It reached a preliminary deal with the China Minmetals Corporation in late September. But the Chinese government's control of Minmetals prompted a political outcry in Canada, and the deal fell apart.
Other would-be bidders, including Xstrata, had declined to bid on Noranda because it did not fully own Falconbridge, a leading Canadian nickel producer.
To resolve that issue, Brascan engineered a complex merger between Falconbridge and Noranda that was completed in June. Brascan's holdings in the merged company was 20 percent, compared with its 42 percent stake in Noranda, the larger of the two companies.
The share sale to Xstrata valued Falconbridge at 28 Canadian dollars ($23.40) a share, slightly less than Friday's closing price on the Toronto Stock Exchange. If Xstrata makes an offer for other Falconbridge shares over the next nine months at a higher price, it will pay Brascan the difference.
# posted by Eastlaw @ 7:41 AM 
