The bidding got too high for Phelps Dodge and Inco Ltd wasn't going to get shareholder support for the deal, so both parties withdrew their Combination agreement.
J. Steven Whisler, CEO of Phelps Dodge explained in an Sept. 5 company statement, "When we entered into our Combination Agreement with Inco for the three-way combination with Falconbridge, we saw a unique opportunity to create the preeminent North American-based miner with leading positions in copper and nickel and one having enormous synergies. We knew it would be a challenging undertaking to succeed against the various hostile bids for Falconbridge and Inco.... When Xstrata increased its all-cash offer for Falconbridge to an amount we could not justify, even with the enormous synergies available in the three-way combination, we declined to support higher bids for Falconbridge."
Inco CEO Scott Hand said in a Sept. 5 statement, "It was very clear from the proxies we received that Inco shareholders were not going to support the Phelps Dodge transaction, so the two companies agreed that it was in our respective best interests to move on."
Under terms of the agreement, Inco has paid Phelps Dodge $125 million and has agreed to pay Phelps Dodge a further $350 million if it consummates a change-of-control transaction on or prior to Sept. 7, 2007. These terms are the same as would have applied under the Combination Agreement if the Inco shareholders had failed to approve the combination at the meeting of Inco shareholders scheduled for Sept. 7, 2006.
Phelps Dodge is a producer of copper and molybdenum and is the largest producer of molybdenum-based chemicals and continuous-cast copper rod. Inco is primarily a producer of nickel but also produces copper, precious metals and cobalt.