London - Xstrata, which is seeking to break up a merger of two Canadian rivals, has made an unsolicited C$16.1 billion (R93 billion) offer for Falconbridge in a bid to create the world's fourth-largest mining company.
Xstrata would offer C$52.50 a share for the 80 percent of Falconbridge that it did not already own, the Swiss-based company said yesterday. The bid was 12.3 percent more than Inco's May 13 offer and valued Falconbridge at C$20 billion, Xstrata said.
"We believe Xstrata intended at some point to launch a bid for the whole company," John Meyer, an analyst at Numis Securities in London, said last week. A successful bid would give Xstrata "increased commodity and geographic diversity".
Xstrata, led by chief executive Mick Davis, and Inco are vying for Falconbridge after global metal prices rose to records on soaring Chinese demand. Buying Falconbridge would add nickel to Xstrata's production, which includes coal, copper, zinc and chrome. Falconbridge also has copper mines in Chile and zinc plants in Canada.
"We have based our valuation on a considered view of long-run prices, taking into account our expectation that commodity prices will remain above historical averages for a number of years," Davis said.
Shares of Xstrata rose 4.6 percent to £21.98 (R264) yesterday and the company was valued at £14 billion.
Xstrata bought a 20 percent stake in Falconbridge in August for C$2.05 billion. Davis said Xstrata did not want to be a long-term minority holder in any company.
Inco, which offered C$51.17 in cash for each Falconbridge share on May 13, is a target of a hostile C$17.8 billion bid from Teck Cominco. Teck said its offer was conditional on Inco shelving its plans for Falconbridge.
Shares of Xstrata have more than doubled in the past 12 months and climbed 54 percent this year as metal prices soared. Prices for copper have risen 90 percent on the London Metal Exchange this year. Zinc has gained 86 percent.
Xstrata's offer for Falconbridge, which will be open until July 7, would be financed partly through a sale of shares, the company said yesterday.
In August, Xstrata paid Brascan, which was later renamed Brookfield Asset Management, C$28 a share for 20 percent of Falconbridge. Xstrata agreed with Brookfield that if it offered more than C$28 for the rest of Falconbridge before May 15, Xstrata must pay the difference to Brookfield.
Xstrata is the largest exporter of coal burned by power plants, with production in Australia, South Africa and Colombia. It also produces copper and controls the world's largest zinc-smelting plant in Spain. - Bloomberg