This is just nutty.
Inco (NYSE: N ) wanted to buy Falconbridge (NYSE: FAL ) . Falconbridge was game, but then Xstrata came into the picture. Then Teck Cominco decided that it wanted to buy Inco. And thenPhelps Dodge (NYSE: PD ) made an offer for both Inco and Falconbridge.
So, the way I see it, just two more things have to happen. Either Rio Tinto (NYSE: RTP ) or BHP Billiton (NYSE: BHP ) have to make an offer, and then some private equity group has to figure out the way to raise the debt such that Falconbridge could launch a "Pac-Man defense" takeover of either Rio Tinto and BHP Billiton. At that point, the heads of mining CEOs and investment bankers around the world would collectively explode, and we could get on with our lives.
Seriously, though, this whole situation keeps getting crazier by the minute. Last week, Inco announced that it had failed to receive the necessary 50%-plus tender shares from Falconbridge shareholders, and so the bid expired unfulfilled (even though Falconbridge supported it). Now Xstrata, which offered more and now owns about one-quarter of Falconbridge, should be theoretically free to finish its purchase of Falconbridge.
Inco will get $150 million from Falconbridge (and another $300 million if Xstrata succeeds), but it'll need to pay out a little more than $32 million for a related scuttled deal to sell the Nikkelverk refinery to LionOreMining. But Inco also received a higher bid from Teck Cominco, which not only values Inco shares at a higher level than Phelps Dodge's previous bid, but offers more cash as well.
For whoever "wins" Inco, the Falconbridge offer's failure is probably not terrible news. Yes, it would have added more assets and more leverage, but it would have also meant more goodwill, more dilution, and more debt -- and those are seldom welcomed with enthusiasm. In fact, Phelps Dodge shares have remained pretty strong as this as all played out -- though whether it's because commodity markets have recovered, or because many investors don't want any deal, is fertile ground for discussion.
Personally, I'd say to heck with all of it. Just gimme a Rio Tinto, and maybe a little bit of CHALCO (NYSE: ACH ) or a coal or steel company, and leave all the copper and nickel games to sort themselves out.
For more heavy metal insanity:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).