TORONTO (CP) -- Brazilian metals giant CVRD has surprised Canico Resources Corp. [TSX:CNI] with a C$725-million takeover bid, triggering a potential bidding war for the junior Vancouver-based firm that owns the Onca Puma nickel project in Para State, Brazil.
The bid from Copanhia Vale do Rio Doce, or CVRD, was unsolicited, Canico CEO Michael Kenyon said in an interview Thursday.
He added that he hasn't yet seen the full offer, only CVRD's news release, and can't yet comment on its suitability.
The offer amounts to C$17.50 a share, which CVRD said is a premium of about 29% over the volume-weighted average trading price of Canico's shares for the past 30 days.
But in trading Thursday, Canico shares jumped more than 31%, or C$4.60, to C$19.25 - signalling many stockholders are expecting a higher offer.
''As far as we're concerned, the C$17.50 bid is inadequate,'' said Eric Zaunscherb, an analyst with Raymond James Ltd. ''We're looking for at least C$20. And we expect there to be more bids.''
Inco discovered the Onca Puma project, which Zaunscherb describes as ''one of the best, if not the best, nickel laterite projects'' in the world.
''People assume Inco will come in,'' said Kerry Smith, an analyst with Haywood Securities.
Inco signed a deal with Canico in 2001 allowing it to acquire the entire 39,943-hectare property. Canico was required to raise at least C$22.5 million for project expenses and Inco received its 18% interest.
As part of the deal, Inco was given a ''right of first refusal'' to acquire Onca Puma if Canico decided to sell it. However, Kenyon says Inco has no right of first refusal on a takeover bid for all of Canico.
One analyst, who did not wish to be named, said Inco likely won't enter the bidding race, because it would have to pay more for the property than it sold it for.
''Management wouldn't be willing to take the heat,'' he said.
Last week, Canico's board adopted a shareholder rights plan that would give the board and investors extra time to consider any unsolicited bid.
Kenyon said he believes Canico can fully fund the Onca Puma project on its own - with financing that is being arranged by CIBC and Barclays Bank PLC - and the Vancouver firm was not looking for a buyer.
But he said experience has taught him that takeover bids come at this point in a project's development. Kenyon is the former president of Sutton Resources Ltd., which was bought by Barrick Gold [TSX:ABX; NYSE:ABX] in 1999 for more than C$500 million after it advanced the Bulyanhulu gold project in Tanzania.
''The management of Canico has a long history of doing this, and that is identifying excellent, world-class projects which are then scooped up by senior companies,'' Zaunscherb said.
Toronto-based Falconbridge announced this month that it found two new nickel deposits in Brazil. It also became the subject of takeover speculation when Swiss miner Xstrata PLC bought Brascan Corp.'s 19.9% stake in Falconbridge for C$2 billion.
''Falconbridge is under siege by Xstrata, so in that case it's a good strategy to deploy your capital as quickly as possible,'' Zaunscherb said.
CVRD said full details of its offer will be included in documents to be mailed to Canico shareholders. A takeover would be subject to the acquisition of at least 50 per cent plus one of Canico's common shares.
''Canico has consented to CVRD proceeding with the offer as required under the terms of a confidentiality agreement previously entered into between the parties,'' CVRD said.
It sees ''significant synergies'' from Onca Puma, which is close to the Brazilian firm's own mining operations.
Zaunscherb predicts CVRD will trump any other bidders in the end ''because they do have the best synergy.''
CVRD calls itself the largest metals and mining company in the Americas and one of the largest in the global metals and mining industry, with a market capitalization of about $40 billion US.
It's the biggest global producer and exporter of iron ore and pellets, the world's second-largest producer of manganese and ferro-alloys, one of the world's lowest-cost producers of aluminum products and a producer of copper, potash and kaolin.
CVRD is also the largest logistics player in Brazil, owning and operating several railways and ports.
(c) The Canadian Press 2005