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Phelps Dodge ups offer
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August 20, 1999: 4:49 p.m. ET
Copper titan raises bid for Cyprus Amax, Asarco to $2.7B after rejection
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NEW YORK (CNNfn) - Phelps Dodge Corp. late Friday raised its hostile bid to join the merger of rivals Cyprus Amax Minerals Co. and Asarco Inc., offering about $2.7 billion for the three-way deal to create the world's largest copper maker.
Phoenix-based Phelps Dodge, moving quickly following a Friday morning rejection from Cyprus Amax and Asarco, said its new bid raises to about 30 percent the premium on shares of each of those companies.
The alliance would amount to the second big planned merger in the metals industry in two days, after a $6 billion pact Thursday between aluminum companies Alcoa Inc. and Reynolds Metals.
Phelps Dodge, which said the two bids are not contingent on each other, said it would pay $1.7 billion, or about $18.40 per share, for Asarco, and about $960 million, an estimated $24.05 per share, for Cyprus Amax.
"The bid was in fact raised somewhat today," Douglas Yearley, Phelps Dodge chairman and CEO, said during a conference call Friday. He said there were two reasons for the new bid.
"The first was that the other side showed better cost savings and second, they had turned down first offer and we thought this was the appropriate place to be," he said.
Asarco spokesman Jerry Cooper said Friday afternoon the company had not received any new offer -- suggesting Phelps Dodge may be trying to appeal to shareholders directly first in what is known as a "bear hug" buyout ploy.
"They may want to make a higher offer, but they haven't contacted us yet," Cooper told CNNfn.com Friday afternoon. A Cyprus Amax Minerals spokesman couldn't be reached.
Earlier in the day, Cyprus Amax and Asarco announced they rejected a hostile $2.4 billion bid by Phelps Dodge, and reiterated their own merger plans. But that deal, Yearley insisted, offers no premium on the company's stock.
"Why is our proposal superior? Well, obviously, first and foremost is the 30 percent premium," he said. "More importantly, the dividend will be increased four times."
Under the first offer -- as Asarco and Cyprus outlined it -- Phelps Dodge offered $16.81, roughly $1.52 billion total, for each Cyprus share. Asarco was first valued at $22 a share, for a total value of about $874 million.
Phelps Dodge said it's now offering 0.3135 of its shares for every Cyprus Amax share, and 0.4098 shares for every Asarco share.
Yearley said he first approached the two targets Aug. 10. Phelps Dodge said it expects its deal will provide $200 million in cost savings, about $85 million of that in administrative expenses.
Wall Street appeared to leap at the new offer. Shares of Cyprus (CYM) shot up 2-7/8 to 17-3/8. Asarco (AR) soared 4 to 22-7/16 - up 22 percent, while Phelps Dodge (PD) added 3-3/4 to 62-5/16.
Asarco and Cyprus agreed to merge on July 15 in a stock swap now valued at more than $1.3 billion. Under terms of the deal, Cyprus Amax holders will receive 0.765 of a share of the new Asarco Cyprus stock for each share.
They said the new company, Asarco Cyprus Inc., will become the largest publicly traded copper company, second in size only to the Chilean-government owned firm Codelco. The new company will be based in New York.
"We think the combined Asarco-Cyprus combination offers tremendous value to shareholders," Cyprus senior vice president Gerald Malys told CNNfn Friday, reinforcing the merger plans.
"Especially if the copper market improves, there is tremendous upside in the combined company," he said.
The companies said they have set shareholder meetings for Sept. 30 to vote on the merger. They also said they have calculated that the merger should result in annual savings from expenses of about $200 million. 
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