[Kabar-indonesia] Phelps Dodge Won't Buy PT Inco Shares; DIA to Appeal

[Joyo at aol.com]

Phelps Dodge Won't Buy PT Inco Shares; DIA to Appeal

July 3 (Bloomberg) -- Phelps Dodge Corp., the world's
third-largest copper producer, said it won't have to
make an offer to buy more shares of PT International
Nickel Indonesia.

Phelps Dodge agreed June 26 to buy Inco and
Falconbridge Ltd. for about $35.4 billion. Shares of
the Jakarta-based PT Inco, 61 percent owned by its
parent, were suspended June 28 on speculation
Phoenix-based Phelps Dodge may also need to make an
offer for the remaining shares in the unit under
Indonesian law.

"Based on discussions with Indonesian counsel, we
understand the amalgamation of Phelps Dodge and Inco
on the terms contemplated in the combination agreement
which was announced on June 26 should not trigger any
requirement to tender for the publicly traded minority
interests in PT Inco," as the Indonesian unit is
called, Phelps Dodge Treasurer Stanton Rideout said in
an interview on June 30.

The claim is disputed by DIA Holdings Overseas BV,
which owns 2.5 percent of PT Inco shares. It plans to
appeal today to the Capital Market Supervisory Agency,
Indonesia's financial markets regulator, and to the
Jakarta Stock Exchange, Tobias Brown, who manages
investments for DIA Holdings, said.

Phelps Dodge will appoint 11 out of 15 board members
of the combined company, giving it control of the new
company and its units, Brown said from Hong Kong,
citing filing by Phelps Dodge with the U.S.

Securities and Exchange Commission.

`Textbook Example'

Under Indonesian law, a new owner that has the ability
to appoint or influence the appointment of at least 50
percent of a company's directors, must make a takeover
offer, Brown said.

``This is a textbook example of why the Indonesian
laws related to general offers and change of control
are in place,, Brown said.

``Indonesian authorities have to move in, look at the
documents and filings from Phelps Dodge and Inco, and
see what they're saying to shareholders.''

Ahmad Fuad Rahmany, the chairman of the market
regulator, couldn't be reached for comment as he was
attending a meeting in the Ministry of Finance, his
office said.

PT Inco shares rose 100 rupiah, or 0.5 percent, to
19,650 rupiah on the Jakarta stock exchange at 11:14
a.m. local time. The shares fell June 30 when trading
resumed after the unit said that Phelps Dodge and Inco
would merge as equals, eliminating the need for Phelps
to make an offer for PT Inco's stock.

On June 26, Phelps Dodge Chief Executive Steve
Whistler sent an e-mail to employees announcing plans
to ``acquire the combined Inco and Falconbridge.''

`Withholding Benefits'

A joint statement by Phelps Dodge, Inco and
Falconbridge released the same day cited Inco Chief
Executive Scott Hand saying the new company gives Inco
shareholders ``a substantial premium for their stock''
and ``creates an opportunity for all three groups of
shareholders to participate'' in the company with $6.3
billion in combined sales.

``Phelps Dodge cannot keep control premium in America
when Inco derives a bulk of its cash flow from
Indonesia. They are withholding the benefits from
Indonesian shareholders'' by not offering to buy the
remaining shares, Brown said.

On April 20, Inco said it produced 135 million pounds,
or 61,235 tons, of nickel in the quarter ended March.
PT Inco said the next day it produced 17,400 tons in
the same period. PT Inco reported $43.6 million in net
income for the quarter, compared with the parent's
$202 million.

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Joyo Indonesia News Service
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