Monday, November 20, 2006

More Mining Consolidation

Readers of Corporate Tool will recall my fondness for the flurry of transactions this year in the mining sector, which has seen an unprecedented level of consolidation and hotly-contested deals. Those who followed this summer's trials and travails will recall the following:

1. Inco and Phelps Dodge agree to merge, with Inco acquiring Falconbridge as part of what is to be a 3-way deal.

2. Falconbridge is not to be had so easily, ultimately succumbing to Xstrata after a protracted bidding war.

3. Inco, reeling from its loss in the Falconbridge bidding, breaks off its agreement with Phelps Dodge and falls into the arms of CVRD - but not without extracting a nice premium in yet another bidding war.

This morning comes the news that Phelps Dodge, unable to bulk up as planned, has sold to Freeport-McMoRan for $26B. This represents a 33% premium on top of what has already been a nice run-up on the back of record copper prices; Phelps shares were at an all-time high before the deal was announced. A nice time to sell, and this summer's series of interloping offers obviously led Freeport to lob in what is sure to be a knockout proposal (further boosted by being two-thirds cash).

Besides the valuations and the bidding intrigue in all these deals, what's fascinating is the speed with which consolidation is causing even old-line companies in an old-line industry to lock up: Phelps has been an independent enterprise since the 1830's!

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