Phelps says it won't make an offer for Inco shares
Tuesday, July 4 2006 - 01:05 AM WIB
Phelps Dodge agreed June 26 to buy Inco and Falconbridge Ltd. for about US$35.4 billion. Shares of the Jakarta-based PT Inco, 61 percent owned by its parent, were suspended June 28 on speculation Phoenix-based Phelps Dodge may also need to make an offer for the remaining shares in the unit under Indonesian law. The Jakarta Post reported on Tuesday.
?Based on discussions with Indonesian counsel, we understand the amalgamation of Phelps Dodge and Inco on the terms contemplated in the combination agreement which was announced on June 26 should not trigger any requirement to tender for the publicly traded minority interests in PT Inco,? as the Indonesian unit is called, Phelps Dodge Treasurer Stanton Rideout said in an interview on June 30.
The claim is disputed by DIA Holdings Overseas By, which owns 2.5 percent of PT Inco shares. It plans to appeal Monday to the Capital Market Supervisory Agency, Indonesia?s financial markets regulator, and to the Jakarta Stock Exchange, Tobias Brown, who manages investments for DIA Holdings, said.
Phelps Dodge will appoint 11 out of 15 board members of the combined company, giving it control of the new company said that Phelps Dodge and Inco would merge as equals from Hong Kong, citing filing by Phelps Dodge with the U.S. Securities and Exchange Commission.
Under Indonesian law, a new owner that has the ability to appoint or influence the appointment of at least 50 percent of a company?s directors, must make a takeover offer, Brown said.
?This is a textbook example of why the Indonesian laws related to general offers and change of control are in place,, Brown said. ?Indonesian authorities have to move in, look at the documents and filings from Phelps Dodge and Inco, and see what they?re saying to shareholders.?
Ahmad Fuad Rahmany, the chairman of the market regulator, couldn?t be reached for comment as he was attending a meeting in the Ministry of Finance, his office said.
PT Inco shares rose Rp 100, or 0.5 percent, to Rp 19,650 on the Jakarta stock exchange at 11:14 a.m. local time. The shares fell June 30 when trading resumed after the unit eliminating the need for Phelps to make an offer for PT Inco?s stock.
On June 26, Phelps Dodge Chief Executive? Steve Whistler sent an e-mail to employees announcing plans to ?acquire the combined Inco and Falconbridge.?
A joint statement by Phelps Dodge, Inco and Falconbridge released the same day cited Inco Chief Executive Scott Hand saying the new company gives Inco shareholders ?a substantial premium for their stock? and ?creates an opportunity for all three groups of shareholders to participate? in the, company with $6.3 billion in combined sales.
?Phelps Dodge cannot keep control premium in America when Inco derives a bulk of its cash flow from Indonesia. They are withholding the benefits from Indonesian shareholders? by not offering to buy the remaining shares, Brown said.
On April 20, Inco said it produced 135 million pounds, or 61,235 tons, of nickel in the quarter ended March. PT Inco said the next day it produced 17,400 tons in the same period.
PT Inco reported $43.6 million in net income for the quarter, compared with the parent?s $202 million. (*)