Merger Plan Creates Concern Over Nickel Alloy [WSJ]
By ADAM COHEN
February 14, 2006; Page A20
BRUSSELS – Concerns over a potential stranglehold over a nickel alloy that can withstand the heat of jet engines could create antitrust problems for mining group Inco Ltd.'s $10.8 billion planned takeover of rival Falconbridge Ltd.
If regulators allow the deal, the combined Canadian mining companies would become the world's largest nickel producer, surpassing Russia's OAO Norilsk Nickel. Defense contractors, specialty nickel makers and a rival nickel miner, France's Eramet SA, have complained to regulators that the two Canadian companies will control more than 90% of the high-grade nickel needed to make so-called super alloys.
Inco and Falconbridge have offered to shed Norway's Nikkelverk plant, the world's largest refiner for nickel used in super alloys. Inco spokesman Steve Mitchell said the jet-engine market represents less than 1% of demand for primary nickel.
Inco also disputes the contention of some deal critics that a merger would significantly narrow the supplier base. Mr. Mitchell said at least six other companies still provide the nickel and that others could provide it as well.
The dispute comes at a sensitive time. Strong demand in China has sent nickel prices skyward during recent years.
Defense contractors, among the main users of nickel super alloys, are raising national-security worries. In November, the U.S. Justice Department asked the companies for more detailed information on the deal. The Justice Department doesn't comment on pending antitrust cases.
European regulators have a Feb. 24 deadline to clear the deal or launch a four-month, in-depth investigation.
The European Commission's antitrust spokesman, Jonathan Todd, said regulators are still studying the deal and haven't made a decision. Meanwhile, Canadian regulators cleared the deal last month.
Both companies have said they are negotiating with regulators. "We expect to hear about remedies required [in the U.S. and Europe] to resolve competitive concerns over the next two weeks," Mr. Mitchell said. Later, he added, "We believe there are no serious competitive concerns that need to be addressed that we have not already evaluated."
Falconbridge's general counsel, Jeffrey Snow, said the companies "currently are making submissions to U.S. and European regulators" but declined to discuss specific antitrust concerns.
The combination of the companies' main Sudbury, Ontario, mining operations has long been considered a cost-saving move. Critics of the deal say the site is one of only two places in the world that mine the high-grade nickel ore required for nickel super alloys. The South Pacific island of New Caledonia, where Eramet has operations and Inco is developing a mine, is the other source.
Nickel closed at $14,930 a metric ton in London late yesterday, up roughly 80% from the 2001 price. |
