Mergers, Acquisitions and Takeovers Case Study

Phelps Dodge’s U$40 bn Deal for INCO and Falconbridge: Blockbuster Mining Takeover Deal

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Abstract:
On June 2006, US based copper miner Phelps Dodge Corporation announced its plan to acquire Canada’s INCO Ltd and Falconbridge Ltd for US$ 40 bn. The deal would be the biggest corporate takeover in the Canadian corporate history. The new entity would be named Phelps Dodge INCO Corporation. Analysts predicted that the new company would be globally the largest nickel producer, world’s largest publicly traded copper producer and a leading producer of molybdenum and cobalt. The corporate office and the copper division of the new company would be headquartered in Phoenix (Arizona, US), while the new company’s nickel division, INCO Nickel, would be headquartered in Toronto (Canada). However, after the announcement of the mega-merger, both the analysts and global mining industry were skeptical about the success of the deal since the industry had experience of similar big deal that often caused disappointment and crushed small time investors. Analysts opined that it was certainly possible that the merger of INCO Ltd and Falconbridge Ltd. with Phelps Dodge Corporation became a ‘marriage made in heaven’ but a portfolio strategy study of eleven largest transactions proved an unhappy history of transactions that could be better termed as ‘marriage made in hell. The case deals in detail about the potential synergy and strategic advantage behind the deal, how the companies plan to leverage the deal and how this mega deal could overcome the problems associated with big deals.

Pedagogical Objectives:

• To understand the global mining industry
• To discuss about the acquisition
• To analyse the potential synergies of the merger
• To debate on whether the merger would be successful or not.

Keywords : Mergers,Acquisitions,Alliances Case Study;Phelps Dodge Corporation; Inco Limited; Falconbridge Limited; Phelps Dodge Inco Corporation; BHP Billiton; Rio Tinto; Anglo American; Companhia Vale do Rio Doce (CVRD); Global mining industry; Sudbury Basin; Metal bulletin; Teck Cominco; Roger Angnelli; Alcan Aluminium Ltd; Noranda Inc

Contents : 
Phelps Dodge Corporation
Falconbridge Limited
Potential Synergies: Making Of A Mineral Behemoth
Metals Mettle: Yet To Be Proved