Offer of cash and Inco common shares for approximately Cdn. $34 per
Falconbridge common share TORONTO, Oct. 11 /PRNewswire-FirstCall/
-- Inco Limited ("Inco")(TSX, NYSE:N) and Falconbridge Limited
("Falconbridge")(TSX:FAL.LV; NYSE:FAL) announced today that their
respective Boards of Directors have approved the acquisition of all
the outstanding common shares of Falconbridge by Inco by way of a
friendly take-over bid. The combined organization, which will be
known as Inco Limited, will be one of the world's premier mining
and metals companies in both nickel and copper, with one of the
mining industry's most attractive portfolios of low-cost,
profitable growth projects. The two companies have entered into a
support agreement covering this offer. Inco will offer Cdn. $34.00
in cash or 0.6713 of an Inco Common Share plus Cdn. $0.05 in cash
for each Falconbridge common share. Falconbridge's common
shareholders will have the right to elect to receive all cash or
all Inco Common Shares (plus Cdn. $0.05 per Falconbridge Common
Share), subject to pro ration based upon the maximum amount of cash
and Inco Common Shares offered. Under the terms of this offer, the
maximum amount of cash to be paid by Inco will be approximately
Cdn. $2.87 billion, and the maximum number of Inco Common Shares to
be issued will be approximately 201 million, taking into account
the conversion of Falconbridge's outstanding convertible debt
securities and outstanding share options. Assuming full pro ration
of these maximum amounts, this would mean Cdn. $7.50 in cash and
0.524 of an Inco Common Share for each Falconbridge Common Share
subject to the offer. Inco currently plans to redeem Falconbridge's
junior preferred shares in conjunction with the acquisition of
Falconbridge, with Falconbridge's other preferred shares remaining
outstanding after the completion of the acquisition. "We're
bringing together two great companies, with excellent assets, to
create a great Canadian player in the global markets," said Scott
M. Hand, Chairman and CEO of Inco Limited, who will continue to
serve in that role following the acquisition. "This combination
will create a mining and metals powerhouse, with outstanding growth
prospects and a truly unique opportunity to create significant
value for shareholders going forward." Mr. Hand added, "Given the
excellent growth prospects for both nickel and copper, driven in
large part by continuing strong demand from China, the combined
company will be positioned to generate very strong cash flow and
earnings both in the near and long term, and will have the size and
financial strength to take advantage of new growth opportunities as
they emerge." The combined company expects to immediately achieve
significant synergies and cost savings and currently estimates that
these will total U.S.$350 million per year by the end of 2007.
These synergies and cost savings will come from realizing
efficiencies in overlapping operations, better use of mining and
processing facilities in Canada, improving procurement practices,
building a common information technology base, incorporating best
practices, and capital expenditure savings. "We believe that this
combination will be unique in the mining industry in terms of
securing synergies of this magnitude and breadth, and will
represent an extraordinary opportunity to add shareholder value,"
said Derek Pannell, Chief Executive Officer of Falconbridge, who
will serve as President of the combined company following the
acquisition. "In addition to the obvious and immediate synergies,
there will be opportunities for years to come to generate value by
focusing the combined expertise of our world-class employee groups
on optimizing our businesses." The combination of Inco and
Falconbridge will create: - The world's largest nickel producer,
with pro forma combined estimated 2005 nickel output of 735 million
pounds, forecast to climb to some one billion pounds in 2009; - A
significant global copper producer, with pro forma combined
forecast 2005 production of 1.33 billion pounds, expected to
increase to approximately 2.4 billion pounds in 2009; - A leading
position in combined estimated proven and probable nickel mineral
reserves from both sulphide and nickel laterite deposits and a
leading portfolio of existing and greenfield nickel properties; -
Significant opportunities for further growth in copper based on
combined estimated pro forma proven and probable copper mineral
reserves; - A globally diverse company with extensive operations in
North and South America, Asia, the South Pacific and Europe; - A
financially robust company with pro forma combined revenues of
U.S.$6.4 billion for the six months ended June 30, 2005 and pro
forma combined cash flow from operations of U.S. $1.25 billion for
the same period; - A "best-in-class" management team and global
workforce. "The combined company will have some of the best mines
and project pipelines in nickel and copper, two metals with what we
see as the strongest economic fundamentals in the next few years,"
said Mr. Pannell. "The expected strong cash generation of our
combined operations positions the company to pursue its growth
strategy on a scale that neither company could have contemplated
individually." The new Inco will have a strong balance sheet,
enhanced financial resources and flexibility to achieve its growth
plan and pursue additional opportunities to enhance shareholder
value. Shareholders in the combined company would also enjoy
significant liquidity given the strong position which it will have
on the TSX and the NYSE, with a total of approximately 390 million
shares to be outstanding on an as issued basis, assuming all
Falconbridge common shares are tendered into the offer. "With the
size and quality of these assets, we believe that our multiple will
reflect the benefits provided by a stronger, diversified metal
base, and the expanded market capitalization of the combined
company," said Mr. Hand. Based on current First Call consensus mean
estimates, this transaction would be significantly accretive in the
first full year after the acquisition from a cash flow perspective.
From an earnings perspective, it would be neutral in the first full
year after the acquisition and significantly accretive in year two.
Assuming all Falconbridge common shares are tendered, on completion
of the transaction current Inco shareholders would hold
approximately 54% and former Falconbridge shareholders would hold
approximately 46% of the fully diluted Inco common shares (in
addition to the Cdn. $2.87 billion aggregate cash consideration to
be received by Falconbridge shareholders as noted above). The Board
of Directors of Falconbridge has determined that the offer is fair
from a financial point of view and will recommend that its
shareholders accept the offer from Inco. In addition, CIBC World
Markets, Falconbridge's financial advisor, has provided an opinion
to the Falconbridge Board of Directors that the offer is fair, from
a financial point of view, to the Falconbridge shareholders. Inco
has received sufficient commitments from the Morgan Stanley,
Goldman, Sachs & Co., Royal Bank of Canada and Bank of Nova
Scotia organizations to finance the cash portion of the offer.
"This combination brings together two management teams with broad
international experience, from exploration, R&D, operations,
project management and marketing," said Mr. Pannell. "Our combined
bench strength will help the new company prosper on the global
scene and we will have the benefit of two highly skilled
workforces, offering a huge pool of collective experience in base
metal mining and processing." In addition to Mr. Hand and Mr.
Pannell, following the acquisition other members of the management
team will include Aaron Regent, Executive Vice-President, Strategy
and Corporate Development; Steve Douglas, Executive Vice-President
and Chief Financial Officer; Peter Goudie, Executive
Vice-President, Marketing; Stuart Feiner, Executive Vice-President,
General Counsel and Secretary; and Ron Aelick, Executive
Vice-President, Integration. Logan Kruger will be responsible for
nickel operations and Peter Kukielski will be responsible for
copper and other metals operations. Four members of the
Falconbridge Board of Directors will join the Inco Board of
Directors following the acquisition. "The new Inco will remain
committed to the common values of the two companies - safety,
respect for the environment, respect and support of the communities
where they operate and respect for our employees worldwide," Mr.
Hand said. "We both take great pride that we have been a positive
force in the communities in which we operate and a good neighbour
around the world and that culture will continue." The Board of
Directors of the new company will review the dividend policy and
level for the new company and the Board intends to continue a
sustainable dividend consistent with the company's capital and
growth requirements. Upon completion of the acquisition, Inco will
remain headquartered in Toronto, Canada. As part of our efforts to
obtain all of the regulatory clearances required to complete this
transaction in an expeditious manner, Inco has been evaluating
what, if any, actions might be required to obtain all such
clearances on a timely basis. To expedite the regulatory process,
Inco is prepared, if required, to divest Falconbridge's Nikkelverk
refinery in Norway and certain related marketing organizations, as
a post-transaction event. This divestiture, if required, could
happen through a sale or an IPO or distribution to the new Inco
shareholders of securities in a separate company formed to own and
independently operate these assets. If required, Inco would provide
the refinery with intermediate product to meet its forecast needs,
consistent with what Falconbridge would have done. Mailing to
Falconbridge shareholders of the terms of the Offer by take-over
bid circular, the Falconbridge Board of Directors' Circular, and
related documents in connection with the Offer, is expected to
occur in the next two weeks, with the Offer being open for
acceptance until 12:00 midnight (Toronto time) 60 days following
the date of the mailing, unless withdrawn or extended. The Offer
will be subject to certain conditions of completion, including
receipt of all necessary regulatory clearances and acceptance of
the Offer by Falconbridge shareholders owning not less than 66 2/3%
of the Falconbridge common shares on a fully diluted basis. Once
the 66 2/3% acceptance level is met, Inco intends, but is not
required, to take steps to acquire all outstanding Falconbridge
common shares. The support agreement also provides for the payment
of a fee of up to U.S. $320 million to Inco by Falconbridge in the
event that the acquisition is not completed for certain reasons.
Morgan Stanley, RBC Capital Markets and Goldman, Sachs & Co.
are acting as financial advisors to Inco and CIBC World Markets is
acting as financial advisor to Falconbridge. Conference Call and
Webcast Interested investors can listen to our presentation to the
investment community on Inco's planned acquisition of Falconbridge
Limited, on a live, listen-only basis, or access the archival
webcast or the recording of the presentation through the Internet
or by calling the toll-free telephone number in North America as
indicated below. The presentation is scheduled for today, October
11, 2005, beginning at 9:00 a.m. (Toronto time), and can be
accessed by visiting the website of a third-party webcasting
service we will be using, CNW Group Ltd., at
http://www.newswire.ca/webcast, at least five minutes before the
start of the presentation. Copies of any slides or other
statistical information to be used for the conference call can be
accessed and will be available for online viewing by persons with a
computer system and Internet connection meeting certain minimum
requirements through http://www.newswire.ca/webcast by clicking on
the event title or through Inco's website, http://www.inco.com/, by
clicking on the icon entitled "Inco offers to acquire Falconbridge"
on the homepage. The archival webcast of the presentation can be
accessed via the Internet through http://www.newswire.ca/webcast. A
recording of the presentation can be listened to until 11:59 p.m.
(Toronto time) on October 25, 2005 by dialing 1-800-558-5253 in
North America and by entering the reservation number 21264826. This
recording is also available outside North America by dialing
416-626-4100 and by entering the same reservation number. Media
Conference A media conference with Scott Hand and Derek Pannell
will be held today (October 11) at the Design Exchange, 234 Bay
Street, Toronto at 11:00 a.m.(est). Authorized media
representatives who are unable to attend the conference in person
may participate by dialing 877-271-4707 within North America and
706-758-2080 outside North America. A live webcast of the media
conference will be available on a website dedicated to the
transaction, http://www.inco.com/newinco, which may also be
accessed via links on both companies' websites,
http://www.inco.com/, and http://www.falconbridge.com/. An archived
version of this webcast will also be posted on the dedicated
website. Forward-Looking Statements -------------------------- This
press release contains forward-looking information about Inco and
the combined company after completion of the transactions described
herein that are intended to be covered by the safe harbor for
"forward-looking statements" provided by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
statements that are not historical facts. Words such as
"expect(s)", "feel(s)", "believe(s)", "will", "may",
"anticipate(s)" and similar expressions are intended to identify
forward-looking statements. These statements include, but are not
limited to, financial projections and estimates and their
underlying assumptions; statements regarding plans, objectives and
expectations with respect to future operations, products and
services and projects; statements regarding business and financial
prospects; financial multiples and accretion estimates; statements
regarding anticipated financial or operating performance and cash
flows; statements regarding expected synergies and cost savings,
including the timing, from the proposed combination of the two
companies; statements concerning possible divestitures; and
statements regarding strategies, objectives, goals and targets.
Such statements are subject to certain risks and uncertainties,
many of which are difficult to predict and are generally beyond the
control of Inco, that could cause actual results to differ
materially from those expressed in, or implied or projected by, the
forward-looking information and statements. These risks and
uncertainties include those discussed and identified in public
filings with the U.S. Securities and Exchange Commission ("SEC")
made by Inco and include, but are not limited to: the possibility
that approvals or clearances required to be obtained by Inco and
Falconbridge from regulatory and other agencies and bodies will not
be obtained in a timely manner; the possibility that divestitures
required by regulatory agencies may not be acceptable or may not be
completed in a timely manner; the possibility that the anticipated
benefits and synergies and cost savings from the acquisition or
related divestitures cannot be fully realized; the possibility that
the costs or difficulties related to the integration of
Falconbridge's operations with Inco will be greater than expected;
the level of cash payments to shareholders of Falconbridge who
exercise their statutory dissenters' rights in connection with the
expected eventual combination of the two companies ; the possible
delay in the completion of the steps required to be taken for the
eventual combination of the two companies;business and economic
conditions in the principal markets for the companies' products,
the supply, demand, and prices for metals to be produced, purchased
intermediates and substitutes and competing products for the
primary metals and other products produced by the companies,
production and other anticipated and unanticipated costs and
expenses and other risk factors relating to the metals and mining
industry as detailed from time to time in Falconbridge's and Inco's
reports filed with the SEC. The forward-looking statements included
in this press release represent Inco's views as of the date hereof.
While Inco anticipates that subsequent events and developments may
cause Inco's views to change, Inco specifically disclaims any
obligation to update these forward-looking statements. These
forward-looking statements should not be relied upon as
representing Inco's views as of any date subsequent to the date
hereof. Readers are also urged to carefully review and consider the
various disclosures in Inco's various SEC filings, including, but
not limited to, Inco's Annual Report on Form 10-K for the year
ended December 31, 2004, and Inco's Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 2005 and June 30, 2005.
Important Legal Information --------------------------- This
release may be deemed to be solicitation material in respect of
Inco's proposed combination with Falconbridge. Inco will prepare
and file, if required, a registration statement on Form F-8,
containing a share exchange take-over bid circular to be delivered
to the shareholders of Falconbridge, and other documents with the
SEC. Falconbridge, if required, will file other documents regarding
the proposed merger with the SEC. INVESTORS AND SECURITYHOLDERS ARE
URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT
DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders will be able to receive the
registration statement and Inco's other SEC filings free of charge
at the SEC's web site, http://www.sec.gov/ or from Inco's media or
investor relations departments. DATASOURCE: Inco Limited CONTACT:
Inco: Media relations: Steve Mitchell, (416) 361-7950; Investor
Relations: Sandra Scott, (416) 361-7758 or http://www.inco.com/;
Falconbridge: Media relations: Ian Hamilton, (416) 982-7161; Media
relations (French): Dominique Dionne, (514) 745-9370; Investor
relations: Denis Couture, (416) 982-7020
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