PAULO, Brazil (AP):

Brazil's CVRD yesterday completed its US$17 billion takeover of Canadian nickel miner Inco Limited, acquiring control of the company in a move cheered by investors amid strong demand for its products.

CVRD's American depository shares soared 3.7 per cent in midday trading on the New York Stock Exchange, or 89 cents to US$25.17.

The deal transforms the Brazilian company into the world's second-largest mining company, after the Anglo-Australian BHP Billiton Limited. Before the acquisition, CVRD was the fourth-largest mining company in the world and the largest iron ore miner.

CVRD extended its cash offer of C$86 (US$76.90) a share until November 3 to get more time to acquire the remaining Inco shares. Companhia Vale do Rio Doce SA will also dissolve Inco's board and delist the company's shares from the New York and Toronto stock exchanges.

Significant upside potential

In a note to clients, Bear Stearns boosted its price target for CVRD shares by US$3 to US$35, saying "the stock continues to offer significant upside potential."

The outlook for nickel, used to make everything from stainless steel to batteries, is bullish with low inventory levels amid strong demand from China and India. Also, nickel production is concentrated in only a handful of producers.

There are few large-scale projects under development, and CVRD controls four of the five new nickel deposits to be developed over the next five years. Analysts also said the deal was good for CVRD because it diversifies the company's metal production away from iron ore.

To ensure approval of the deal by Canadian authorities, CVRD agreed to base its nickel business in Toronto under the auspices of a division called CVRD Inco that will have a Canadian chief operating officer and senior Canadian management.

The Brazilian company said it will not lay off any workers at Canadian installations for three years, and also pledged to boost investments in Inco's Canadian operations.

Inco originally planned a friendly merger with copper producer Phelps Dodge Corp. But the Phoenix, Arizona-based company's stock and cash offer didn't give as much value to shareholders as CVRD's surprise all-cash bid, analysts said.

Also in the bidding for Inco was Vancouver-based Teck Cominco Limited, which pulled out of the race in the face of failed financing.