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Phelps finally wins Cyprus
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September 30, 1999: 3:28 p.m. ET
Cyprus accepts $1.8B bid; Asarco remains target of two rival offers
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NEW YORK (CNNfn) - Phelps Dodge Corp. finally obtained one of the two copper companies it has been actively courting recently when Cyprus Amax Minerals Co. agreed Thursday to accept its $1.8 billion bid.
The agreement calls for Phelps Dodge to exchange 0.2203 share of its common stock and $7.61 cash for each Cyprus share on a fully prorated basis, a Phelps Dodge spokesman confirmed. The deal values Cyprus at $19.80 per share.
Cyprus shareholders can elect to receive either cash or Phelps Dodge shares for each share they own provided at least 63 percent of the deal is paid for in stock. The all-cash election is $20.54 per Cyprus share, while the all-stock election is 0.35 Phelps Dodge share.
The deal comes just two days after Cyprus shelved a $1.86 billion merger agreement with competitor Asarco Inc. in order to allow each company to consider bids from other firms.
Phelps' long pursuit
Phelps has been pursuing Cyprus since early last month, when it made hostile bids for both Cyprus and Asarco in an attempt to break up their planned merger. The Phoenix-based Phelps upped the offer for both companies to a combined $2.75 billion Monday.
In accepting the Phelps Dodge offer, Englewood, Colo.-based Cyprus terminated its agreement with Asarco, which is now free to pursue either a separate $1 billion offer from Phelps or a $1.03 billion offer from rival suitor Grupo Mexico SA made Sunday.
Asarco officials refused to comment on what course their company might now pursue.
"Asarco remains committed to realizing maximum value for its shareholders," said Jerry Cooper, a company spokesman. "To that end, we intend to explore all alternatives available to the company."
Phelps Chairman and CEO Douglas C. Yearly said his company's $1 billion offer for the New York based firm remains on the table. However, he all but dismissed raising Phelps' bid again.
"Phelps Dodge remains interested in acquiring Asarco to realize the additional benefits of a three-way combination, if we can do so on terms that make economic sense for our shareholders," Yearly said. "Our 40 percent premium exchange offer remains on the table and we hope to have further discussions with Asarco."
Phelps officials believe the deal would be immediately accretive to the company's cash flow and accretive to earnings per share in 2001.
Analysts push three-way deal
Analysts praised the Phelps/Cyprus union, which creates one of the world's leading copper and molybdenum producers at a time when the industry is suffering from high costs and depressed copper prices.
But some said the three-way combination with Asarco, where greater cost savings could be achieved, would be the better deal.
"We've said all along we like the three-way deal best," said Anthony B. Rizzuto Jr., an analyst with Bear Stearns in New York. "I don't like this one nearly as much. It's important to get Asarco because we feel that the Asarco assets are the ones not being utilized as well."
Even before a deal with Asarco, Phelps officials said the company expects to achieve annual cash cost savings of $100 million from the combination through expense reductions and efficiencies in exploration.
Phelps Dodge received U.S. antitrust approval for the Cyprus merger last week, setting the stage for a possible completion of the merger, contingent on shareholder approval, next month.
Phelps Dodge (PD) shares rose 7/16 to 55-3/4 shortly after the deal was confirmed while Cyprus (CYM) shares inched up 1/2 to 19-3/4. Asarco shares drifted 7/16 lower to 27. 
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