Inco takeover faces foreign hurdles

[CHIMO]

Inco Ltd.'s $12.5-billion takeover bid for Falconbridge Ltd. appears to have run into a snag over concerns of defence contractors about a possible restriction in the supply of a key nickel-based alloy.

The friendly bid, which would create the world's largest nickel producer, was announced last October but it hasn't closed because of pending approval by a variety of government agencies. Canadian regulators have signed off on the proposed merger but antitrust officials in Europe and the United States have yet to offer their approval, which is critical.

The majority of nickel produced by Inco and Falconbridge, both based in Toronto, is used to make stainless steel. However, both companies also produce high-grade nickel that is mixed with other metals to form alloys used by the aerospace industry to make jet engines. These so-called superalloys are key components in jet turbines because they can withstand scorching heat, up to 1,500 degrees, without expanding.

Some analysts and industry observers say many defence industry suppliers are worried about the Inco-Falconbridge merger. “Antitrust issues have centred on the fact that the combined Inco-Falco entity would be the sole producer of a particular nickel alloy used by the U.S. defence industry,” Wiktor Bieiski, a London-based analyst at Morgan Stanley, said in a recent research note.

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What a bunch of crap. And people here are worried about Harper. Never mind the infighting.

On the RIM of...