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. Last Updated: 07/27/2016

Phelps Clinches Deal to Form Copper Giant




NEW YORK -- Asarco Inc. said Wednesday it accepted a sweetened $1.12 billion cash and stock takeover bid from rival Phelps Dodge Corp. in a deal setting the stage for the creation of the world's largest copper company.


The deal calls for Phoenix-based Phelps Dodge to pay $28.21 per share in cash and stock for New York-based Asarco.


The transaction marks the end of Phelps Dodge's aggressive efforts to break up a planned union of Asarco and Cyprus Amax Minerals Co. by launching hostile bids for both companies. After rejecting the bids initially and vowing to stick to their own transaction, shareholder pressure forced the two companies to solicit other bids.


Phelps Dodge reached a friendly $1.8 billion agreement with Cyprus last week.


"Phelps Dodge divided and conquered. They did everything smart and everything went their way," one trader who specializes in takeover stocks said.


The acquisition of both Asarco and Cyprus will put Phelps Dodge in the top spot among world copper producers, toppling Chile's state-owned Codelco from first place.


Phelps Dodge said Wednesday it expects to achieve at least $200 million in cost savings from the two acquisitions that will help it compete better in a volatile and cyclical industry that has been grappling with overcapacity and low commodity prices.


Phelps Dodge said it expects to phase in the cost savings by the end of 2001, at which point the deal will begin to add to its earnings per share, based on current copper price estimates.


Asarco's board of directors voted Tuesday night to accept the offer, which represents a $148 million increase from Phelps' previous bid, which was made in September, sources familiar with the situation said. The new offer calls for Phelps Dodge to pay $14.75 per share in cash and swap 0.2513 of a Phelps Dodge share for each of Asarco's 39.8 million outstanding shares.


The Phelps Dodge board voted Tuesday afternoon to authorize the latest bid, one source said.


Earlier Tuesday, Asarco set a deadline for final bids from Phelps Dodge and Mexican mining and rail company Grupo Mexico, which recently jumped into the bidding fray with a $1.03 billion offer, equivalent to $26 a share in cash.


It was not immediately known if Grupo Mexico, which already owns 10 percent of Asarco, sweetened its offer in the last round of bidding. It had said it would not raise the bid. A $30 million breakup fee is included in the Asarco-Phelps Dodge transaction, expected to close Oct. 20, sources said.


As expected, the transaction does not include positions for Asarco's top management, the sources said.