Phelps Dodge increases bid for copper giants

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PHEONIX (AP) — Phelps Dodge Corp. upped its bid Wednesday for copper rivals Asarco Inc. and Cyprus Amax Minerals Co., hoping to persuade stockholders to gut a planned merger between the two companies.

Phoenix-based Phelps Dodge added $1 billion cash to its previous stock-only offer.

Asarco and Cyprus have already rebuffed two offers from Phelps Dodge, choosing instead to move ahead with their planned merger. Shareholders in New York-based Asarco, and Englewood, Colo.-based Cyprus Amax are scheduled to vote on that deal on Sept. 30.

Douglas C. Yearley, Phelps Dodge chairman and chief executive officer, said the company decided on the increase after talking with stockholders who wanted them to add cash and value to the deal.

The new Phelps Dodge offer calls for the company to pay $9 cash plus 0.288 of a Phelps Dodge share for each Asarco share and $6.89 in cash plus 0.2203 of a Phelps Dodge share for each Cyprus share.

Stockholders would be given a choice between cash and stock, but Phelps Dodge will only pay up to 35 percent of the deal in cash, Yearley said.

Shares of all three companies shot higher Wednesday on the New York Stock Exchange. Cyprus Amax was up 9 percent, or by $1.56 1/4, at $18.81 1/4; Asarco was up 10 percent, or by $2.06 1/4, at $22.50; and Phelps Dodge was up 2.6 percent, or by $1.50, at $58.68 3/4.

Based on Wednesday's prices, the offer valued Asarco at $25.90 a share, or $1.03 billion, and Cyprus Amax at $19.82 a share, or $1.79 billion. That made the total stock-and-cash value of the deal $2.82 billion, or $270 million more than the previous all-stock bid.

The previous bid amounted to $932 million for Asarco and $1.62 billion for Cyprus Amax.

Yearley said that while the company was willing to negotiate on some portions, it does not plan to increase the overall price.

He said Phelps Dodge is willing to acquire one company without the other but is still hopeful a three-way deal can be worked out.

Asarco spokesman Jerry Cooper and Cyprus spokesman John Taraba both declined to comment on the offer.

Kurt Billick, an analyst for Warburg Dillon Read, said the offer seems to be a good deal for Asarco and Cyprus Amax.

''I don't understand why shareholders wouldn't take this bid,'' he said.

So far, though, Asarco has remained resistant to Phelps Dodge's overtures. On Monday, Asarco filed a lawsuit against Phelps Dodge claiming the company wrongly interfered with its Cyprus merger plans. Cyprus Amax did not join in the suit.

''The problem is Asarco's management is clearly focused on getting something other than the best price for its company. ...The primary concern is preserving management jobs,'' Billick said.

J. Clarence Morrison, a metals analyst for Prudential Securities, said Phelps Dodge has put together a good acquisition package.

Logic suggests Francis McAllister, Asarco's chairman and chief executive officer, ''may be forced into this kicking and screaming,'' he said.

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