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. Last Updated: 07/27/2016

Top Miner Created in $40Bln Deal

NEW YORK — Phelps Dodge on Monday said it would acquire Canada's Inco and Falconbridge for about $40 billion in a blockbuster deal to create a top global copper and nickel miner.

Phelps Dodge said it would buy Inco for 80.13 Canadian dollars per share in cash and stock. Inco, which previously agreed to acquire Falconbridge, in turn raised its existing offer for Falconbridge to an implied value of 62.11 Canadian dollars per share.

The deal had an immediate impact on commodity markets, where nickel gained $200 per ton on the news.

"The new company will have greater control of copper, nickel and molybdenum production. This means they may be able to smooth out cyclical price variations," UBS analyst Robin Bhar said. "Both companies were swift to cut back production when prices were at their lows in 2001; they may also be able to fast-track projects when prices rise."

The companies forecast combined annual cost savings of $900 million by 2008. The deal would also add to earnings from 2008 onward, while adding to cash flow immediately.

The combined Phelps Dodge Inco would be based in Phoenix, where Phelps Dodge has its headquarters, with the new Inco Nickel division run out of Toronto. Phelps Dodge CEO J. Steven Whisler would be chairman and CEO of the combined entity. Inco CEO Scott Hand would be vice chairman. Falconbridge CEO Derek Pannell would be president of Inco Nickel and head all nickel, aluminum and zinc operations.