Asarco-Cyprus Amax say Phelps Dodge must increase its bid to create merger
August 25, 1999
PHEONIX (AP) — Asarco Inc. and Cyprus Amax Minerals Co. have set a stiff price if Phelps Dodge Corp. wants to persist with plans for a three-way merger.
New York-based Asarco and Englewood, Colo.-based Cyprus Amax, two of the world’s leading copper and metals producers, have already agreed to merge to form the nation’s largest copper company. Last week, they rebuffed a $2.7 billion all-stock offer from Phelps Dodge to aquire both in a three-way combination.
But in a joint letter sent to Phelps Dodge on Wednesday, the two issued the terms under which they would be receptive to a Phelps Dodge takeover.
Asarco chairman Francis R. McAllister and Cyprus Amax Chairman Milton H. Ward said they would require Phelps Dodge to sweeten the deal by $600 million, or 22 percent, by increasing the exchange ratio. They also said Phelps Dodge would have to underwrite ”the risk of antitrust problems,” such as divestitures, before they will discuss the deal further.
Phoenix-based Phelps Dodge released a statement calling those terms ”totally unreasonable.” However, the company said it would review the proposal and that it remains committed to a three-way combination ”that is beneficial to shareholders of all three companies.”
”If Asarco and Cyprus Amax are truly interested in a negotiated transaction and not just posturing, we would be more than willing to start real discussions,” said Phelps Dodge Chairman Douglas C. Yearley. ”Neither company has attempted to sit down with us.”
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Phelps Dodge recently slashed its production by closing mines, smelters and refineries throughout the Southwest, laying off approximately 1,650 workers in Arizona, New Mexico and Texas. The industry has suffered in the wake of falling copper prices and lower copper sales.
Ward called Phelps Dodge’s offer ”an opportunistic and somewhat desperate proposal.”
Under the proposal put forth Wednesday, Asarco shareholders would get .53 of a Phelps Dodge share for each Asarco share held, compared with the Phelps Dodge offer of .4098 a share. Cyprus Amax shareholders demand .4055 of a Phelps Dodge share, up from the offered 0.4055 share.
Based on Wednesday’s closing stock price of $57.62 1/2, that would value Asarco at $30.54 a share, or $1.2 billion, and Cyprus at $23.37 a share, or $2.1 billion.
Phelps Dodge’s offer values Asarco at $23.61 a share, or $937 million and Cyprus at $18.07 a share, or $1.6 billion.
McAllister said a combined Asarco Cyprus will produce 2 billion pounds of copper annually, compared with Phelps Dodge’s production of 1.7 billion pounds.
Phelps Dodge has said neither offer was contingent on the success of the other, but McAllister said Cyprus and Asarco ”have an agreement that we’re together on this deal.”