Hedge Fund Opposes Proposed $25.9 Billion Offer for Phelps Dodge

Date: Monday, December 11, 2006
Author: Canadianbusiness.com

PHOENIX (AP) - A hedge fund with a 5.1 percent stake in Phelps Dodge Corp. plans to vote against a proposed $25.9 billion takeover of the mining company by Freeport-McMoRan, saying the offer does not fairly value Phelps Dodge.

SAC Capital Partners, a hedge fund group led by Steven A. Cohen that has spent $464 million to acquire 10.3 million shares in the Phoenix-based miner, said Monday that Freeport-McMoRan Copper & Gold Inc. and Phelps Dodge Corp. won't fit well together. Phelps Dodge is worth more than Freeport-McMoRan is offering to pay, according to SAC Capital.

Despite the announcement by SAC, Freeport spokesman Bill Collier said the company's offer has gotten a positive response from other shareholders.

"The agreement we reached with Phelps Dodge delivers compelling value to Phelps Dodge shareholders, and is positive for FCX shareholders," Collier said in a statement. "We are confident that shareholders of both companies will approve the transaction."

Under Freeport-McMoRan's offer, each Phelps Dodge share would be exchanged for $88 in cash plus 0.67 of a common share of Freeport-McMoRan.

Another major Phelps Dodge shareholder, Atticus Capital LP, which has a 9.97 percent stake, said it has not yet taken a position on the offer.

"We will continue to independently evaluate all available alternatives for Phelps Dodge, including Freeport-McMoran," spokesman Andy Merrill said.

Shares of Phelps Dodge dropped 80 cents to close at $122.87 on the New York Stock Exchange after rising to a 52-week high of $124.75 earlier in the session.