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CVRD Bids for Inco Ltd of Canada

The world largest iron ore producer, Brazil`s CVRD (Companhia Vale do Rio Doce) announced last week a preliminary offer of $15.3 billion to acquire Canada`s Inco Ltd., which is the world`s second-largest nickel producer. Should the deal be approved by regulators, CVRD would assume $1.9 billion of Inco debt. The company will formally present the bid on Monday, August 14, and Inco Ltd. of Canada will have 45 days to make a decision in response.

A press release from Brazil?s CVRD said the combination of CVRD and Inco would 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 ferro-alloys, and lead to an exciting world-class pipeline of projects to be supported by a large-scale, long-life and low-cost asset portfolios. No details were provided on whether Inco would take the CVRD name or remain a recognizable brand of its own.

Reports have also stated that CVRD?s all-cash offer will allow Inco shareholders to realize upfront in cash Inco`s profitable growth potential without incurring that the risk of that such potential will not be realized. There was no indication as of press time as to what the Canadians of Inco Ltd thought of the offer, and it is likely that no reaction will be forthcoming until the deal is formally offered.