Phelps Dodge in Deal to Buy Cyprus Amax

Phelps Dodge Corp., the nation’s largest copper producer, struck a friendly deal Thursday to buy Cyprus Amax Minerals Co. for $1.8 billion in cash and stock, ending its monthlong hostile takeover effort and killing a 2-month-old merger pact between Cyprus and Asarco Inc.

Phoenix-based Phelps Dodge sweetened its hostile offer by about $65 million in cash. Based on Thursday’s stock prices, the deal values Cyprus at $19.74 a share.

Phelps Dodge and Englewood, Colo.-based Cyprus entered friendly talks this week after Cyprus and Asarco amended their merger pact to allow each company to negotiate with other buyers. Cyprus and Asarco, both copper producers, also delayed a shareholder vote on their deal as it became apparent other suitors had emerged.

“We are extremely pleased that we were able to reach a negotiated agreement with Cyprus Amax that is clearly in the interest of both companies,” Phelps Dodge Chairman and Chief Executive Douglas Yearley said.

Meanwhile, New York-based Asarco is the target of competing offers from Phelps Dodge and Mexican mining and rail company Grupo Mexico.

Phelps Dodge said it remains interested in buying Asarco.

Before signing the deal with Phelps Dodge, Cyprus paid Asarco the $45-million breakup fee that was required in their merger pact.

The Phelps-Cyprus deal does not include a role for Cyprus Chairman, Chief Executive and President Milton Ward. It also does not provide Cyprus with any seats on the Phelps board.

The agreement calls for Phelps to exchange 0.2203 of a share and $7.61 in cash for each of Cyprus’ outstanding 90.7 million shares. In setting the friendly deal, Phelps Dodge did not change the stock exchange ratio of its original bid but sweetened the cash portion of the offer by 72 cents a share, or about $65 million.

Cyprus stock rose 38 cents to close at $19.63, Phelps fell 25 cents to close at $55.06 and Asarco slipped 44 cents to close at $27, all on the New York Stock Exchange.