We were joined on our Commodities show today by former Inco CEO Scott Hand, who looked back 10 years to 2006 when the nickel miner agreed to a takeover by Brazil’s Vale. That came just weeks after Falconbridge, Inco’s fellow Canadian nickel giant, was taken over by Xstrata.
Yes, Hand told us, many Canadians were worried to see control of the lavishly endowed Sudbury, Ontario mineral basin go into foreign hands.
But he recalled that there was little or no government support in 2006 for the idea of creating a Canadian mining standard-bearer – that, he says, contrasted with 2010 when Saskatchewan Premier Brad Wall got Ottawa to block the takeover of PotashCorp. on national grounds. “Unlike Potash a few years back when the Premier said ‘no,’ there were no “no’s’ stated at our time.”
Indeed, the Ontario government of then-Premier Dalton McGuinty doesn’t seem to have done much if anything to keep the two nickel giants in Canadian hands.
The merger dance that pushed Inco and Falconbridge into foreign ownership contained tangled plot lines that make Game of Thrones look simple. Among other players, it involved:
- Conglomerate Brascan, predecessor to Brookfield Asset Management, which controlled Falconbridge.
- Teck Resources CEO Don Lindsay, who made a hostile bid for Inco.
- U.S. copper producer Phelps Dodge, which worked on a deal with Inco in which it would have backstopped Inco's takeover of Falconbridge and then acquired the combined company.
The Globe’s Jacquie McNish was critical of Inco: “Inco's directors and executives moved too late to forge a transformational alliance with its neighbour Falconbridge. When they did act, their naiveté and lack of prowess in the political and takeover arena weakened their hand. … BHP Billiton and Xstrata now tower over Canadian mining companies. These risk takers, not Inco or Falconbridge, are the builders of a new mining century.”
But Hand reminded us that his job was to look after shareholders – and that he did table a bid for Falconbridge.
Ultimately, he says, investors in the two companies got a rich price (far more than if they had owned the stock in the 2009 resource collapse.) “If you were an Inco or Falconbridge shareholder, you did pretty well.”
But for many Canadians, it’s hard to shake the feeling that the country gave up a treasure that would have been retained by other nations.
“Brazil wouldn’t have let it happen,” Hand told us. “No one can take over Vale.”