Phoenix-based mining company Phelps Dodge Corp. and Canadian metals companies Inco Ltd. and Falconbridge Ltd. Sunday raised their offer to Falconbridge shareholders for a three-way merger by about half a billion to $17.3 billion.

Phelps Dodge's takeover of Inco, coupled with Inco's offer for Falconbridge, would create a dominant copper and nickel producer in the North American market.

The deal, which is supported by Falconbridge's board, competes with an offer from Switzerland's Xstrata PLC, which has offered to buy Falconbridge for $16.2 billion in cash.

Phelps Dodge on Sunday increased the cash portion of its offer for Inco by 2.75 Canadian dollars ($2.44) per share to 20.25 Canadian dollars ($17.96) per share.

Phelps Dodge said that including stock, the offer is now worth 80.70 Canadian dollars ($71.42) per Inco share. Inco shares closed Friday at $66.25 on the New York Stock Exchange.

Inco raised the cash portion of its bid for Falconbridge by 1 Canadian dollar (88 U.S. cents).

To further sweeten the deal for its shareholders, the board of Falconbridge declared a special cash dividend of 75 Canadian cents (66 U.S. cents) per share.

The total implied value of the higher bid for Falconbridge is 63.43 Canadian dollars ($56.26) per share, Phelps Dodge and Inco said.

Inco also reduced the total number of Falconbridge shares that need to be tendered for its offer to be successful to 50.01 percent from two-thirds.

The Falconbridge board concluded Inco's offer was superior to a bid by Xstrata, which had offered 59 Canadian dollars ($52.73) a share on Tuesday, and recommended that its shareholders accept the Inco offer.