SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
SCHEDULE 14D-9/A*
(AMENDMENT NO. 9)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
_________________
ASARCO INCORPORATED
(Name of Subject Company)
ASARCO INCORPORATED
(Name of Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
043413103
(CUSIP NUMBER OF CLASS OF SECURITIES)
FRANCIS R. MCALLISTER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ASARCO INCORPORATED
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 510-2000
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement).
With Copies to:
J. MICHAEL SCHELL
MARGARET L. WOLFF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
*Relates to offer by Phelps Dodge Corporation
This Amendment No. 9 to the Solicitation/Recommendation Statement on
Schedule 14D-9 of ASARCO, originally filed with the Commission on September
9, 1999 (the "Schedule 14D-9"), relates to the exchange offer for all of
the outstanding shares of ASARCO Common Stock which is described in a
Tender Offer Statement on Schedule 14D-1 of Phelps Dodge Corporation, a New
York corporation ("Phelps Dodge"), filed with the Securities and Exchange
Commission on September 3, 1999, as amended, which incorporates the
prospectus of Phelps Dodge contained in the Registration Statement on Form
S-4 of Phelps Dodge filed with the Commission on August 27, 1999, as
amended by Amendment No. 1 thereto filed with the Commission on September
1, 1999, Amendment No. 2 thereto filed with the Commission on September 2,
1999 and Post-Effective Amendment Nos. 1 and 2 thereto filed with the
Commission on September 22, 1999 and October 7, 1999, respectively.
Defined terms used but otherwise not defined herein shall have the meanings
ascribed to such terms in the Schedule 14D-9.
ITEM 2. TENDER OFFER OF THE BIDDER.
The Phelps Dodge Offer is being amended pursuant to the Agreement and
Plan of Merger, dated as of October 5, 1999 (the "Merger Agreement"), among
Phelps Dodge, AAV Corporation, a Delaware corporation and wholly owned
subsidiary of Phelps Dodge ("Sub A"), and ASARCO. A copy of the Merger
Agreement is filed as Exhibit 30 to this Amendment and is hereby
incorporated by reference. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of ASARCO Common Stock
pursuant to the Phelps Dodge Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the New Jersey Business Corporation Act ("NJBCA"),
ASARCO will be merged with and into Sub A (the "Merger"). At the effective
time of the Merger (the "Effective Time") each share of ASARCO Common Stock
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without action on the part of ASARCO, Phelps
Dodge, Sub A or the holder thereof, be converted into and shall become the
right to receive either $29.50 per share, net to the seller in cash,
without interest or 0.50266 of a share of Phelps Dodge Common Stock,
subject to the election and proration provisions of the Merger Agreement
and to the terms and conditions of the Merger Agreement and the Phelps
Dodge Offer. The Merger Agreement is summarized in Item 3(b) of this
Amendment.
ITEM 3. IDENTITY AND BACKGROUND.
Subsection (b) of Item 3 is hereby amended by adding the following:
THE PHELPS DODGE/ASARCO MERGER AGREEMENT
We believe this summary describes the material terms of the Merger
Agreement. However, we recommend that you read carefully the complete
agreement for the precise legal terms of the Merger Agreement and other
information that may be important to you. A copy of the Merger Agreement is
attached as Exhibit 30 and is incorporated herein by reference.
The Phelps Dodge Offer
Conditions. Phelps Dodge's obligation to complete the Phelps Dodge
Offer is subject to the following conditions:
o at least 80% of the outstanding shares of ASARCO shall have been
tendered and not withdrawn (the "Minimum Condition");
o the approval by Phelps Dodge's stockholders of the issuance of Phelps
Dodge's common stock in the Phelps Dodge Offer and the Merger;
o such shares of common stock shall have been authorized for listing on
the NYSE, subject to official notice of issuance;
o the effectiveness of the registration statement for such common stock;
o no legal restraint such as an injunction shall be in effect that would
prevent consummation of the Phelps Dodge Offer;
o no change in tax law that would be inconsistent with the Merger
qualifying as a reorganization under Section 368(a) of the Code;
o accuracy of representations and warranties of ASARCO, unless failure
to be accurate would not reasonably be expected to have a material
adverse effect on ASARCO; and
o compliance by ASARCO in all material respects with material agreements
and covenants in the Merger Agreement.
Phelps Dodge expressly reserves the right to waive any condition,
(other than the Minimum Condition, the Phelps Dodge Stockholder Approval
Condition and the condition relating to the effectiveness of the
Registration Statement) to increase the consideration per share of ASARCO
common stock payable in the Phelps Dodge Offer, provided however, that no
charge may be made which decreases the consideration per share of ASARCO
common stock payable in the Phelps Dodge Offer or which reduces the
maximum number of shares of ASARCO common stock to be acquired in the
Phelps Dodge Offer.
Consideration and Election Procedure. The Merger Agreement provides
for the consideration that Phelps Dodge will pay in the Phelps Dodge
Offer, including the election and proration procedures.
Expiration or Termination of Amended Offer. Phelps Dodge agreed to
extend the Phelps Dodge Offer at any time up to March 31, 2000 for one or
more periods of not more than 10 business days, if at the expiration date
of the offer, or any extension thereof, any of the conditions to the offer
is not satisfied or waived; provided, however, that if all the conditions
to the offer are satisfied or waived but the number of ASARCO shares
tendered is 85% or more, but less than 90%, of the then outstanding number
of ASARCO shares then Phelps Dodge may extend the Phelps Dodge Offer for
an aggregate period of not more than three business days beyond the
expiration date.
Form of Merger
If all the conditions to the Merger are satisfied or waived in
accordance with the Merger Agreement, AAV Corporation, a wholly owned
subsidiary of Phelps Dodge, will merge with ASARCO, with AAV Corporation
surviving (the "Surviving Corporation"). As a result of the Merger, the
identity and separate existence of ASARCO shall cease. The Merger will
become effective when the applicable certificates of Merger are filed with
the Secretaries of State of the States of Delaware and New Jersey. It is
currently anticipated that the Merger will become effective during the
fourth quarter of 1999.
Consideration to be Received in the Merger
At the time the Merger becomes effective,
Conversion of ASARCO Common Stock. Subject to no fractional shares being
issued, each issued and outstanding share of ASARCO common stock (other
than shares to be canceled in accordance with the Merger Agreement) shall
be converted into the ASARCO Consideration, the ASARCO Cash Consideration
or a combination thereof, determined pursuant to provisions of the Merger
Agreement (such consideration is referred to herein as the "Merger
Consideration"). If there is an excess of cash elections with respect to
the Phelps Dodge Offer, each outstanding share of ASARCO common stock will
be converted in the Merger into the right to receive 0.50266 Phelps Dodge
common shares (the "ASARCO Stock Consideration"). If there is an excess of
stock elections with respect to the Phelps Dodge Offer, each outstanding
share of ASARCO common stock will be converted in the Merger into the right
to receive $29.50 net in cash, without interest (the "ASARCO Cash
Consideration"). If there is not an excess of cash or stock elections, each
outstanding share of ASARCO common stock will be converted in the Merger
into (i) an amount of cash equal to the ASARCO Merger Cash Amount (as
hereinafter defined), without interest, and (ii) a number of shares of
Phelps Dodge common stock equal to the ASARCO Merger Stock Amount (as
hereinafter defined). The ASARCO Merger Cash Amount and the ASARCO Merger
Stock Amount will be determined as follows:
1. The aggregate amount of ASARCO Cash Consideration actually paid in
the Phelps Dodge Offer will be subtracted from the Total ASARCO
Available Cash (as hereinafter defined) to determine the amount of
cash available to be paid in the Merger (the "Aggregate ASARCO Merger
Cash Consideration"). "Total ASARCO Available Cash" equals (i) the
number of shares of ASARCO common stock exchanged in the Phelps Dodge
Offer plus the number of shares of ASARCO common stock to be
converted in the ASARCO Merger, multiplied by (ii) $14.75.
2. The Aggregate ASARCO Merger Cash Consideration will be divided by
the number of shares of ASARCO common stock to be converted in the
Merger, to determine the amount of cash consideration to be paid in
respect of each such share of ASARCO common stock in the Merger (the
"ASARCO Merger Cash Amount").
3. The aggregate number of shares of Phelps Dodge common stock
actually issued as ASARCO Stock Consideration in the Phelps Dodge
Offer will be subtracted from the Total ASARCO Available Stock (as
hereinafter defined) to determine the number of shares of Phelps
Dodge common stock available to be paid in the Merger (the "Aggregate
ASARCO Merger Stock Consideration"). "Total ASARCO Available Stock"
equals (i) the number of shares of ASARCO common stock exchanged in
the Phelps Dodge Offer plus the number of shares of ASARCO common
stock to be converted in the Merger, multiplied by (ii) 0.25133120.
4. The Aggregate ASARCO Merger Stock Consideration will be divided by
the number of shares of ASARCO Amax common stock to be converted in
the Merger, to determine the number of shares of Phelps Dodge common
stock to be issued in respect of each such share of ASARCO common
stock in the Merger (the "ASARCO Merger Stock Amount").
As of the effective time of the Merger, all such shares of ASARCO
common stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate or certificates which immediately prior to the effective time
represented outstanding shares of ASARCO common stock shall cease to have
any rights with respect thereto, except the right to receive (x) if the
Merger Consideration includes Phelps Dodge common stock, (i) Phelps Dodge
certificates, (ii) certain dividends and other distributions in accordance
with the Merger Agreement, and (iii) cash instead of fractional shares of
Phelps Dodge common stock in accordance with the Merger Agreement, without
interest, and (y) if the Merger Consideration includes cash, the
appropriate cash amounts.
Exchange Agent; Procedures for Exchange of Certificates
Exchange Agent. At the time the Merger becomes effective, Phelps
Dodge shall enter into an agreement with a bank or trust company that is
reasonably satisfactory to ASARCO, with which Phelps Dodge shall deposit
cash and certificates representing the number of whole shares of Phelps
Dodge common stock issuable pursuant to the Merger Agreement in exchange
for outstanding shares of ASARCO common stock. Soon after the completion
of the Merger, Phelps Dodge will send a letter to each person who was an
ASARCO stockholder at the time the Merger became effective. The letter
will contain instructions on how to surrender ASARCO stock certificates to
the exchange agent and receive shares of Phelps Dodge and cash. See "--
Consideration to be Received in the Merger."
Dividends. Holders of ASARCO common stock will not be entitled to
receive any dividends or other distributions payable by Phelps Dodge until
they exchange their ASARCO stock certificates for certificates
representing shares of Phelps Dodge common stock. Once they deliver their
ASARCO stock certificates to the exchange agent, those stockholders will
receive, subject to applicable laws, accumulated dividends and
distributions, without interest.
Fractional Shares. No fractional shares of Phelps Dodge common stock
will be issued upon the surrender of certificates representing shares of
ASARCO common stock. No dividend or other distribution of Phelps Dodge
will relate to any such fractional shares and no such fractional shares
will entitle the owner thereof to any voting or other rights of a
stockholder of Phelps Dodge.
Holders of ASARCO common stock otherwise entitled to fractional
shares of Phelps Dodge common stock will receive a cash payment instead of
such fractional shares. Following the effective time, the exchange agent
will determine the excess of the number of whole shares of Phelps Dodge
common stock delivered to the exchange agent by Phelps Dodge for
distribution to ASARCO stockholders over the aggregate number of whole
shares of Phelps Dodge common stock to be distributed to ASARCO
stockholders. The exchange agent will then, on behalf of the former
stockholders of ASARCO, sell the excess shares at then prevailing prices
on the New York Stock Exchange, all in the manner provided in the Merger
Agreement.
As soon as practicable after the determination of the amount of cash
to be paid to holders of ASARCO common stock with respect to any
fractional share interests, the exchange agent will make available such
amounts to such holders of ASARCO stock subject to and in accordance with
the terms of the Merger Agreement.
Surviving Corporation following the Merger
Name of Surviving Corporation. The name of the Surviving Corporation
from and after the effective time of the Merger (the "effective time")
shall be "ASARCO Incorporated" until changed or amended in accordance with
applicable Law.
Charter Documents. At the effective time, the certificate of
incorporation and the bylaws of AAV Corporation, as in effect immediately
prior to the effective time, shall be the certificate of incorporation and
bylaws, respectively, of the Surviving Corporation.
Directors and Officers. The directors of AAV Corporation at the
effective time shall be the directors of the Surviving Corporation until
their respective successors are duly elected and qualified, as the case
may be. The officers of AAV Corporation at the effective time shall be the
officers of the Surviving Corporation until their respective successors
are duly appointed.
Representations and Warranties in the Merger Agreement
In the Merger Agreement both parties make representations and
warranties to each other about their companies with respect to, among
other things:
o their organization, existence, good standing, corporate power,
subsidiaries and similar corporate matters;
o their capitalization;
o their authorization, execution, delivery and performance and the
enforceability of the Merger Agreement and related matters; the
recommendation by their boards of directors to their shareholders of
the Merger Agreement and the transactions contemplated thereby;
o the absence of conflicts, defaults or violations under their
certificates of incorporation and bylaws, certain other agreements
and laws as a result of the contemplated transactions, and related
matters;
o filings with the SEC and the accuracy and completeness of the
information contained in such filings;
o environmental matters;
o employee benefit matters;
o the prospectus relating to the Phelps Dodge Offer, the Phelps Dodge
proxy statement, the registration statement and other SEC filings and
the accuracy of the information contained therein;
o the inapplicability of the ASARCO shareholder rights plan to the
Phelps Dodge Offer and the Merger;
o tax matters;
o the receipt of fairness opinions from our financial advisors;
o required stockholder approvals with respect to the contemplated
transactions;
o the absence of certain material changes in our businesses since
December 31, 1998;
o the absence of undisclosed material liabilities;
o labor relations; and
o no prior activities conducted by AAV Corporation.
All representations and warranties of Phelps Dodge and ASARCO expire
at the time the Merger becomes effective.
Covenants in the Merger Agreement
The Merger Agreement provides that, until the Merger has been
completed, neither party will take certain actions without the consent of
the other party or as otherwise permitted by the Merger Agreement. More
specifically, we have agreed to the following with respect to ourselves
and, where applicable, our subsidiaries, except as otherwise permitted by
the Merger Agreement:
o Conduct of Operations. We will conduct our business operations
according to their ordinary and usual course of business in
substantially the same manner as conducted prior to the Merger
Agreement.
o Preserve Organizations. We will use our reasonable best efforts to
preserve intact our business organizations and goodwill, keep
available the services of our current officers and other key
employees, and preserve our business relationships.
o Parties to Confer. We will confer with each other and report on
material operational matters and the general status of ongoing
operations.
o Notice of Certain Events. We will notify each other of certain
changes or events which would have a material adverse effect on
Phelps Dodge or ASARCO, as the case may be.
o Dividends and Reclassifications. We will not declare or pay any
dividends on or make any distribution with respect to our outstanding
shares of stock other than regular quarterly dividends on, in the
case of Phelps Dodge, its common stock, and, in the case of ASARCO,
its common stock and preferred stock, and we will not split, combine
or reclassify any shares of its capital stock.
o Amendments to Plans. We will not enter into or amend our employee
benefit plans or employment agreements, except in the ordinary course
of business consistent with past practice, as otherwise provided in
the Merger Agreement or as required by law.
o Business Combinations; Assets. We will not enter into any business
combinations, acquisitions or dispositions of material amounts of
assets or securities, or release any material contract rights, in
each case not in the ordinary course of business.
o Governing Documents. We will not propose or adopt any amendments to
our corporate charters or by-laws.
o Issuance of Capital Stock. We will not issue or authorize the
issuance of any shares of our capital stock of any class, except that
each of us is permitted to issue shares of our common stock upon the
exercise of stock options or other rights outstanding on the date of
the Merger Agreement and in accordance with the terms of such options
or other rights in effect on the date of the Merger Agreement.
o Repurchase of Stock. We will not purchase or redeem any shares of our
stock or any rights, warrants or options to acquire any such shares,
except in the ordinary course of business in connection with employee
incentive and benefit plans or arrangements in existence on the date
of the Merger Agreement.
o Indebtedness. We will not incur, assume or prepay any indebtedness or
other material liabilities, other than indebtedness with a wholly
owned subsidiary or between wholly owned subsidiaries.
o Properties and Assets. We will not sell, lease, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any of our
properties or assets (including securitizations), other than in the
ordinary course of business consistent with past practice.
o Tax Treatment. We will not take any actions that would reasonably be
expected to cause the Merger not to constitute transactions described
in Section 368(a) of the Internal Revenue Code.
o Tax Election. We will not make any material tax election or settle or
compromise any material tax liability, other than in the ordinary
course of business consistent with past practice.
o Agree to Take Actions. We agree not to take any of the foregoing
actions or take any action which would:
o make any of our representations or warranties contained in the Merger
Agreement untrue or incorrect, or
o result in any of the conditions to the Merger set forth in the Merger
Agreement not being satisfied.
o Investigation. We have agreed that, subject to applicable laws or
regulations, prior to the time the Merger becomes effective we will
afford one another's authorized representatives full and complete
access to our properties, books, contracts, commitments and records
and any document filed or received by us pursuant to applicable
securities laws. Also, we will each use our reasonable best efforts
to cause our representatives to furnish promptly to one another any
additional information about our respective businesses and properties
as the other or its duly authorized representatives may reasonably
request. However, neither of us will be required to disclose
information to the other that would cause significant competitive
harm to the disclosing party or its affiliates if the Merger is not
completed. All confidential information obtained by Phelps Dodge or
ASARCO will be kept confidential. Confidential information will be
used only in connection with consummating the transactions
contemplated by the Merger Agreement.
Stockholder Approvals and Other Cooperation
We have agreed that we will together:
o prepare and file with the SEC, as soon as is reasonably practicable,
an information statement to be sent to ASARCO after the Phelps Dodge
Offer;
o use our reasonable best efforts to have the information statement
cleared by the SEC;
o amend as necessary Phelps Dodge registration statement;
o as soon as is reasonably practicable, take all actions required under
state blue sky or securities laws in connection with the issuance of
shares of Phelps Dodge common stock in the Merger;
o promptly prepare and file stock exchange listing applications
covering the shares of Phelps Dodge common stock issuable under the
Merger Agreement and use our reasonable best efforts to obtain, prior
to the time the Merger becomes effective, approval for the listing of
Phelps Dodge common stock, subject only to official notice of
issuance;
o cooperate with one another in order to lift any injunctions or remove
any other impediment to the consummation of the contemplated
transactions; and
o cooperate with one another in obtaining opinions of Shearman &
Sterling, special counsel to Phelps Dodge, and Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel to ASARCO, concerning certain tax
matters.
Each of us has also agreed:
o that Phelps Dodge will cause an appropriate supplement to the Phelps
Dodge proxy statement to be mailed to its stockholders as promptly as
practicable after it is cleared by the SEC.
o that ASARCO will cause the information statement to be mailed to its
stockholders as promptly as practicable after it is cleared by the
SEC;
o as soon as practicable following the date of the Merger Agreement, to
duly call and hold a meeting of our respective stockholders to obtain
approval of the Merger and the other contemplated transactions;
o subject to our ability to change our recommendation as described
under "--No Solicitation of Alternative Takeover Proposals" below,
through our boards of directors, to recommend to our respective
stockholders that they approve the Merger and the other contemplated
transactions;
o to use our best efforts to hold our stockholders meetings as soon as
practicable after the date of the Merger Agreement;
o that Phelps Dodge shall vote, or cause to be voted, all of the ASARCO
common stock then owned by it or any of its subsidiaries, or over
which it has direct or indirect voting authority, in favor of the
approval and adoption of the Merger Agreement; and
o that after AAV Corporation has purchased shares of ASARCO common
stock through the Phelps Dodge Offer, Phelps Dodge will be entitled
to designate a number of directors on the ASARCO Board that will give
Phelps Dodge a percentage of representation on the ASARCO Board equal
to the percentage of shares of ASARCO common stock that it then owns.
o that the obligation of Phelps Dodge to obtain approvals under
antitrust laws is unconditional and not qualified by best efforts.
In addition, the Merger Agreement contains general covenants
requiring each party to take any further action necessary or desirable to
carry out the purposes of the Merger Agreement and to use reasonable
efforts to take all actions necessary, proper or advisable to consummate
the contemplated transactions. These general requirements are limited so
that neither of us will be required to undertake divestitures which would
have material adverse effects on our companies.
No Solicitation of Alternative Takeover Proposals
ASARCO agreed that it will not, nor will it permit any of its
subsidiaries to, authorize or permit any of their respective directors,
officers, employees or any representative retained by ASARCO or any of its
subsidiaries to, directly or indirectly through another person:
o solicit, initiate or encourage (whether by furnishing information or
otherwise), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes or
reasonably could be expected to lead to any Takeover Proposal (as
defined below), or
o participate in any discussions or negotiations regarding any Takeover
Proposal.
A "Takeover Proposal" means, other than the transactions contemplated
by the Merger Agreement,
o any inquiry, proposal or offer, or any improvement, restatement,
amendment, renewal or reiteration of any such inquiry, proposal or
offer from any person relating to any direct or indirect acquisition
of a business or equity securities of a ASARCO or any of its
subsidiaries, any tender offer or exchange offer that if consummated
would result in any person beneficially owning any class of equity
securities of ASARCO or any of its subsidiaries, or
o any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving ASARCO or
any of its subsidiaries.
Except as provided in the next two paragraphs, neither the board of
directors of ASARCO nor any committee of such board will do any of the
following:
o withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse Phelps Dodge, the recommendation by the board of
directors or any committee of the Merger or the Merger Agreement,
o approve or recommend, or propose publicly to approve or recommend,
any Takeover Proposal, or
o cause ASARCO to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related
to any Takeover Proposal.
However, if the board of directors of ASARCO receives a Takeover
Proposal and the board of directors of ASARCO determines in good faith,
after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to ASARCO shareholders under
applicable law, the board of directors of ASARCO may (x) take any of the
actions described above or (y) terminate the Merger Agreement (and
concurrently with or after such termination, if it so chooses, cause
ASARCO to enter into any acquisition agreement with respect to any
Takeover Proposal) but only after the fifth business day following Phelps
Dodge's receipt of written notice advising Phelps Dodge that the board of
directors of ASARCO is prepared to accept a Takeover Proposal, specifying
the material terms and conditions of such Takeover Proposal and
identifying the person making such Takeover Proposal.
Notwithstanding any subsequent determination by the board of
directors of ASARCO to change such recommendation, the Merger Agreement
shall be submitted to the stockholders of ASARCO at the ASARCO stockholder
meeting for the purpose of obtaining the ASARCO stockholder approval and
nothing contained in the Merger Agreement shall be deemed to relieve
ASARCO of such obligation.
The Merger Agreement does not prohibit us
o from taking and disclosing to our respective shareholders a position
with respect to a tender offer required by law, or
o from making any disclosure to our respective shareholders if, in the
good faith judgment of the board of directors, after consultation
with outside counsel, failure to disclose would be inconsistent with
its obligations under applicable law.
ASARCO agreed to immediately notify Phelps Dodge orally and in
writing of any request for information or of any Takeover Proposal, the
material terms and conditions of such request or proposal and the identity
of the person making such request or proposal, and will keep Phelps Dodge
reasonably informed of the status and details of any such request or
proposal.
Stock Options and Other Stock-Based Awards
Simultaneously with the Merger, each outstanding option to purchase
ASARCO common stock and related stock appreciation right (SAR), if any,
will be converted into an option (together with an SAR, if applicable) to
acquire the number of shares of Phelps Dodge common stock equal to the
number of shares of ASARCO common stock which could have been obtained
upon the exercise of the option immediately prior to the time the Merger
becomes effective multiplied by the ASARCO Stock Consideration.
In the case of an option to purchase ASARCO common stock, the
exercise price per share of Phelps Dodge common stock will be adjusted to
equal the exercise price for such option as in effect immediately prior to
the time the Merger becomes effective divided by the ASARCO Stock
Consideration. Phelps Dodge will assume the obligations of ASARCO with
respect to such options. Phelps Dodge will assume the obligations of
ASARCO under their respective option plans and, except as described above,
the terms of such options (and SARs) shall continue to apply in accordance
with the terms of the plans and agreements under which they were issued,
including any provisions for acceleration.
Simultaneously with the Merger, each outstanding award (including
restricted stock, performance units, shares units and performance shares)
under any employee incentive or benefit plan or arrangement and non-
employee director plan presently maintained by ASARCO will be converted
into a similar instrument of Phelps Dodge, with appropriate adjustments to
preserve the inherent value of the awards with no detrimental effects on
the holders. The other terms of each award will continue to apply,
including any provisions which the restrictions will have lapsed on or
prior to the time the Merger becomes effective, shares of such previously
restricted stock will be converted in accordance with the conversion
provisions applicable to other shares of common stock.
Following the completion of the business combination, Phelps Dodge
will reserve for issuance and delivery a sufficient number of shares of
Phelps Dodge common stock upon the exercise of any ASARCO stock options.
Benefits Matters
It is the intention of the parties that for a period of one year
following the completion of the business combination, Phelps Dodge will
maintain the employee benefit plans of ASARCO generally in accordance with
its terms in effect at the completion of the business combination, with
only amendments that are required by applicable law or permitted by the
terms of that agreement, and which do not adversely affect the rights of
participants under such agreement. In addition, following the completion
of the business combination, Phelps Dodge will guarantee the performance
of certain existing employment agreements and benefit plans of ASARCO.
Phelps Dodge has also agreed that it will
o waive any limitations regarding pre-existing conditions and
eligibility waiting periods under any welfare or employee benefit
plan maintained by ASARCO following the completion of the business
combination;
o provide employees of ASARCO with credit for any co-payments and
deductibles paid in the calendar year prior to the completion of the
business combination; and
o generally, treat all service by employees of ASARCO prior to the
completion of the business combination as service with Phelps Dodge
under all compensation and benefit plans and policies of ASARCO.
Indemnification; Directors' and Officers' Insurance
Phelps Dodge has agreed that all exculpation and indemnification
provisions now existing in favor of the current or former directors or
officers of ASARCO as provided in its charter or bylaws or in any
agreement will survive the business combination. Phelps Dodge has agreed
that, for six years from the time the business combination becomes
effective, it will indemnify such indemnified parties to the same extent
as they were entitled while working on behalf of ASARCO.
Phelps Dodge has also agreed that, for three years from the time the
business combination becomes effective, it will maintain in effect
ASARCO's current directors' and officers' liability insurance policies for
those persons who are currently covered by the policies. However, Phelps
Dodge will not be required to expend in any one year more than 150% of the
annual premiums currently paid by ASARCO. If the annual premiums of such
insurance coverage exceed the 150% limit, Phelps Dodge only will be
obligated to obtain a policy with the greatest coverage available for a
cost not exceeding the limit. Phelps Dodge is entitled to meet its
obligations under this paragraph by covering the relevant persons under
its own insurance policies.
Litigation
Prior to the effective time of the Merger, each of the parties will
terminate all litigation commenced against the other in connection with
the business combination and the Phelps Dodge exchange offer for ASARCO
shares. Each party will also use its reasonable best efforts to have
lawsuits commenced by third parties in connection with those transactions
to be dismissed with prejudice.
Conditions Precedent to the Merger
The Merger Agreement contains certain conditions to both parties,
obligations to complete the Merger. Neither party will be obligated to
complete the business combination unless at or prior to the time the
business combination becomes effective:
o Stockholder Approval. The approval of the stockholders of Phelps
Dodge and ASARCO have been obtained in accordance with applicable
law.
o Legality. No statute, rule, regulation, executive order, decree,
ruling or injunction by any tribunal or governmental authority
prohibits or makes illegal the consummation of the Merger
substantially on the terms contemplated by the Merger Agreement.
o AAV Corporation shall have accepted for exchange all shares of ASARCO
common stock validly tendered and not withdrawn pursuant to the
Phelps Dodge Offer; provided, however, that this condition shall not
be applicable to the obligations of AAV Corporation if, in breach of
the Merger Agreement, AAV Corporation fails to accept for exchange
and exchange any such shares validly tendered and not withdrawn
pursuant to such offer.
Termination
The Merger Agreement may be terminated at any time prior to the time
the Merger becomes effective, in any of the following circumstances: by
our mutual written consent;
o by either of us if, without fault of either terminating party, the
purchase of ASARCO common stock pursuant to the Phelps Dodge Offer
has not occurred on or before March 31, 2000, which date can be
extended by mutual written consent;
o by either of us if the Phelps Dodge Offer expires or is terminated or
withdrawn without any ASARCO common stock being purchased; or
o by either of us if a court or governmental body has issued an order
(other than a temporary restraining order) enjoining or prohibiting
the purchase of ASARCO common stock pursuant to the Phelps Dodge
Offer or the Merger, if such order has become final and
nonappealable, so long as the party seeking to terminate has used its
reasonable best efforts to remove or lift such order; or any statute,
rule, regulation, order, injunction or decree has been enacted,
entered or promulgated which prohibits or makes illegal the
consummation of the Merger substantially on the terms contemplated by
the Merger Agreement, and which order, injunction, or decree has
become final and nonappealable; or there shall have been a failure to
obtain any required consent or approval under foreign laws or
regulations which would prohibit or make illegal the consummation of
the Phelps Dodge Offer or the Merger or would have a material adverse
effect on Phelps Dodge or ASARCO;
o by the Phelps Dodge board of directors, at any time prior to the
purchase of any shares of ASARCO common stock pursuant to the Phelps
Dodge Offer, if (i) the board of directors of ASARCO shall have
withdrawn or modified in a manner which is adverse to Phelps Dodge
its approval or recommendation of the Phelps Dodge Offer or the
Merger Agreement, (ii) the ASARCO board of directors shall have
recommended another Takeover Proposal, (iii) there is a public
disclosure of another Takeover Proposal and the Minimum Tender
Condition is not satisfied but all other conditions to the Phelps
Dodge Offer are satisfied, or (iv) the representations and warranties
of ASARCO are not correct as of the date of the Merger Agreement and
as of the expiration date of the Phelps Dodge Offer as though made on
and as of the date of the Merger Agreement and the expiration date of
the Phelps Dodge Offer, except where the failure of such
representations and warranties to be so true and correct would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on ASARCO; and ASARCO shall have performed or
complied in all material respects with all the material agreements
and covenants required by the Merger Agreement, and such condition is
not satisfied within 30 days of notice;
o by ASARCO, at any time prior to the acceptance for payment shares of
ASARCO common stock under the Phelps Dodge Offer, if there is a
material breach of any of Phelps Dodge's representations, warranties
or covenants contained in the agreement which is not cured within 10
days of notice; and
o by ASARCO in accordance with the provisions described under the
caption "--No Solicitation of Alternative Takeover Proposals";
provided that ASARCO shall have complied with all provisions of such
section and shall have paid the termination fee described below to
Phelps Dodge.
Closing
The closing of the Merger will take place within two business days
after the later of the Phelps Dodge shareholder meeting and the ASARCO
shareholder meeting.
Termination Fees
ASARCO is liable to Phelps Dodge for a termination fee of $30 million
if the Merger Agreement is terminated under certain circumstances.
In general, the termination fee is payable by ASARCO if:
o prior to the date of the ASARCO stockholder meeting a Takeover
Proposal is made known to ASARCO or is made directly to its
stockholders generally or any person has publicly announced an
intention (whether or not conditional) to make a Takeover Proposal
and thereafter the Merger Agreement is terminated by either party
pursuant to certain specified provisions of the Merger Agreement.
However, except as stated in the following paragraph, no termination
fee is payable unless within eighteen months of the termination, ASARCO or
any of its subsidiaries enters into an agreement for or consummates a
transaction whereby a third party acquires twenty percent of any class of
stock of ASARCO and its subsidiaries, or a business that constitutes twenty
percent or more of the revenues, net income or assets of the ASARCO, or
otherwise consummates a Takeover Proposal.
If ASARCO terminates the Merger Agreement under the preceding
paragraph, the termination fee is payable immediately.
The Merger Agreement also provides that if ASARCO fails to pay any
termination fee which is judged to be due, ASARCO must pay the costs and
expenses of any action taken to collect payment, together with interest on
the termination fee.
Costs and Expenses
Each of us will pay our own costs and expenses in connection with the
Merger Agreement and the contemplated transactions whether or not the
Merger is completed, except that we will equally share
o the filing fee in connection with any HSR Act filing or any other
required statutory approval;
o the commissions and other out-of-pocket transaction costs, including
the expenses and compensation of the exchange agent, incurred in
connection with the sale of shares of Phelps Dodge common stock to
generate cash to pay in lieu of fractional shares;
o the expenses incurred in connection with the printing and mailing of
a joint proxy statement (including SEC filing fees);
o all transfer taxes.
Waiver
At any time prior to the effective time, the Merger Agreement permits
either of us in writing to:
o extend the time for the performance of any of the obligations or
other acts of the other party;
o waive any inaccuracies in the representations and warranties of the
other party; and
o waive compliance with any of the agreements or conditions of the
other party contained in the Merger Agreement.
Amendment
At any time before or after approval of the matters presented in
connection with the combination by our respective shareholders, the Merger
Agreement may be amended or supplemented in writing by Phelps Dodge and
ASARCO with respect to any terms; provided, however, that following
approval by ASARCO stockholders there shall be no amendment or change to
the provisions relating to the Merger Consideration or make any other
change not permitted under applicable law without further approval by the
ASARCO stockholders.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the ASARCO Board of Directors
Subsection (a) of Item 4 is hereby amended by adding the following:
AS MORE FULLY DESCRIBED BELOW, ON TUESDAY EVENING, OCTOBER 5, 1999,
THE ASARCO BOARD OF DIRECTORS UNANIMOUSLY (WITH ONE DIRECTOR ABSENT) (1)
APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE PHELPS DODGE OFFER AND THE MERGER, AND
(2) DETERMINED THAT THE TERMS OF THE PHELPS DODGE OFFER AND THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF THE HOLDERS OF ASARCO COMMON STOCK.
ON OCTOBER 7, 1999, ASARCO RECEIVED FROM GRUPO MEXICO THE $29.50 CASH
PROPOSAL DESCRIBED BELOW. IN ACCORDANCE WITH THE MERGER AGREEMENT THE
BOARD OF DIRECTORS HAS NOTIFIED PHELPS DODGE THAT IT IS NECESSARY IN ORDER
TO COMPLY WITH ITS FIDUCIARY DUTIES THAT ASARCO PARTICIPATE IN DISCUSSIONS
WITH GRUPO MEXICO REGARDING ITS PROPOSAL. ACCORDINGLY, THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS NOT TENDER THEIR SHARES IN THE
PHELPS DODGE OFFER AT THIS TIME.
(b) Background; Reasons for the ASARCO Board's Recommendation
Subsection (b) of Item 4 is hereby amended by adding the following:
Background
On the evening of Monday, October 4, 1999, at the direction of
ASARCO, representatives of ASARCO's financial advisors, at the direction
of ASARCO, informed the financial advisors to each of Grupo MExico and
Phelps Dodge that their clients were requested to submit their best and
final bids no later than 6:00 p.m. on Tuesday, October 5, 1999 and orally
advised them of the bidding procedures.
On the morning of Tuesday, October 5, 1999, ASARCO distributed the
bidding procedures in writing to Grupo MExico and Phelps Dodge. During the
course of the day on October 5, 1999, the legal advisors to ASARCO
contacted the legal advisors for each of Grupo MExico and Phelps Dodge to
offer to discuss the terms of their respective acquisition agreements,
forms of which had been exchanged and previously discussed with such legal
advisors, and to provide any necessary assistance they might require to
finalize their bids.
On or about 6:00 p.m. Phelps Dodge submitted its bid which is
embodied in the Merger Agreement. Grupo MExico submitted a fully financed
acquisition proposal together with a form of merger agreement at a price
lower than the Phelps Dodge price.
After receiving both bids, the Board of Directors of ASARCO met and
discussed the bids with the management and their legal and financial
advisors. After considering both bids after receiving advice from its
legal and financial advisors, the Board unanimously (with one director
absent) (i) approved and adopted the Merger Agreement and the transactions
contemplated thereby, including the Phelps Dodge Offer in the Merger, (ii)
determined that the terms of the Phelps Dodge Offer and the Merger are
fair to and in the best interests of the holders of ASARCO Common Stock
and (iii) resolved to recommend that the ASARCO stockholders accept the
Phelps Dodge Offer and tender their shares pursuant to the Phelps Dodge
Offer. Later that evening, the Merger Agreement was executed and delivered
and Phelps Dodge and ASARCO each issued a press release announcing the
transaction. A copy of the ASARCO press release, dated October 6, 1999, is
attached hereto as Exhibit 31 and incorporated herein by reference.
On October 7, 1999, the Board of Directors received a letter from
Grupo MExico stating that it is increasing the price of the Grupo MExico
Offer from $26 per share to $29.50 per share and requesting that the Board
meet with Grupo MExico to "discuss our revised offer." Further, Grupo
MExico requested that the Board "elicit such advice and make such
determinations in view of your fiduciary duties so that ASARCO would be in
a position to immediately engage in negotiations and discussions with
[Grupo MExico] concerning [its] superior proposal." The Board of Directors
has met today and has taken such steps and is prepared to meet with Grupo
MExico to negotiate its revised proposal.
Reasons for the Recommendation
In reaching its conclusions and recommendations on October 5, 1999,
with respect to the Merger Agreement and the Phelps Dodge Offer and Merger
described above, the ASARCO Board of Directors considered a number of
factors, including the following:
1. Management of ASARCO and its advisors solicited possible third
parties who might have been interested in acquiring ASARCO or any of
its businesses and pursued discussions with certain of those parties
concerning a number of possible transactions.
2. The transaction embodied in the Merger Agreement with Phelps Dodge
was the result of the process initiated by management designed to
elicit the best possible transaction for its stockholders, and the
terms of such transaction are more favorable to ASARCO stockholders
than any other transaction presented during such process.
3. The financial terms of the Phelps Dodge Offer and the Merger
represent a substantial premium over the unaffected market price of
the shares of ASARCO Common Stock as of August 20, 1999.
4. The opinion of Credit Suisse First Boston Corporation ("Credit
Suisse First Boston") (which was subsequently confirmed by delivery
of a written opinion) to the effect that as of the date of such
opinion and based upon and subject to the matters set forth therein,
the consideration to be received by the holders of ASARCO Common
Stock (other than Phelps Dodge) in the Phelps Dodge Offer and the
Merger, taken together, was fair, from a financial point of view, to
such holders. A copy of Credit Suisse First Boston's written opinion
which sets forth the matters considered, assumptions made and
limitations on the review undertaken by Credit Suisse First Boston, is
attached hereto and filed as Exhibit 32 and is incorporated herein by
reference. Credit Suisse First Boston's opinion is addressed to the
ASARCO Board of Directors, addresses only the fairness, from a
financial point of view, to the holders of ASARCO Common Stock of the
consideration payable in the Phelps Dodge Offer and the Merger, taken
together, and does not constitute a recommendation to any stockholder
with respect to any matter relating to the Phelps Dodge Offer or
Merger. STOCKHOLDERS ARE URGED TO READ THE OPINION OF CREDIT SUISSE
FIRST BOSTON CAREFULLY AND IN ITS ENTIRETY.
5. The trading history of the shares of ASARCO Common Stock and the
financial condition, results of operations, cash flows and prospects
of ASARCO.
6. The additional value the ASARCO stockholders will receive from the
cash synergies to be derived from the three-way combination of Phelps
Dodge, ASARCO and Cyprus Amax if such stockholders elect to receive
shares of Phelps Dodge Common Stock.
7. The fact that the Merger Agreement allows the Board of Directors
to participate in discussions or negotiations regarding any other
acquisition proposal if it determines in good faith, after
consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to stockholders (although
ASARCO would be required to pay a $30 million termination fee in the
event it terminates the Merger Agreement in order to enter into such
other competing transaction).
8. That ASARCO received a $45 million termination fee from Cyprus
Amax when Cyprus Amax terminated its merger agreement with ASARCO,
and that ASARCO would be obligated to pay a termination fee of only
$30 million if it terminated the Merger Agreement with Phelps Dodge
to enter into a competing takeover transaction.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
Subsections (a) and (b) of Item 7 are hereby amended by adding the
following:
The Board of Directors of ASARCO met on October 8, 1999 to consider
the revised proposal contained in Grupo MExico's letter of October 7,
1999. At the meeting the ASARCO Board of Directors considered, together
with advice from its financial and legal advisors, (i) the terms of Grupo
MExico's revised offer, (ii) ASARCO's rights and obligations under the
Merger Agreement and (iii) its fiduciary duties to stockholders of ASARCO
under applicable law. At the October 8, 1999 meeting, in accordance with
the terms of the Merger Agreement, the Board of Directors determined in
good faith, after consultation with its legal and financial advisors, that
it was necessary in order to comply with its fiduciary duties under
applicable law (x) to modify its recommendation of the Phelps Dodge Offer
and Merger in the manner set forth above in Item 4(a) and (y) if
necessary, to furnish information to Grupo MExico pursuant to a customary
confidentiality agreement and to participate in discussions or
negotiations regarding the Grupo MExico revised proposal. The Board
determined that its should take such action and has so notified Phelps
Dodge in accordance with the terms of the Merger Agreement. A copy of this
notice is attached hereto and filed as Exhibit 33 and is incorporated
herein by reference.
In the afternoon on October 8, 1999, Douglas C. Yearley, Chairman,
President and Chief Executive Officer of Phelps Dodge, telephoned Mr.
McAllister to inform him that Phelps Dodge would not raise its offer.
Except as set forth herein and in Item 4, no negotiation is being
undertaken or is underway by ASARCO in response to the Phelps Dodge Offer
that relates to or would result in (i) an extraordinary transaction, such
as a merger or reorganization involving ASARCO or any subsidiary thereof;
(ii) a purchase, sale or transfer of a material amount of assets by ASARCO
or any subsidiary thereof; (iii) a tender offer for or other acquisition
of securities by or of ASARCO; or (iv) any material change in the present
capitalization or dividend policy of ASARCO.
Except as set forth herein, there is no transaction, board
resolution, agreement in principle or signed contract in response to the
Phelps Dodge Offer that relate to or would result in one or more of the
events referred to above.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 30. Agreement and Plan of Merger, dated as of October 5, 1999,
among Phelps Dodge, AAV Corporation and ASARCO.
(Incorporated by reference to Exhibit 99.1 to the Current
Report on Form 8-K of ASARCO, filed with the Commission on
October 6, 1999) 16
Exhibit 31. ASARCO press release, dated October 6, 1999. (Incorporated
by reference to Exhibit 99.2 to the Current Report on Form
8-K of ASARCO, filed with the Commission on October 6, 1999)
Exhibit 32. Opinion of Credit Suisse First Boston Corporation, dated
October 5, 1999.
Exhibit 33. Letter from ASARCO to Phelps Dodge, dated October 8, 1999.
Exhibit 34. Press release of ASARCO, dated October 8, 1999.
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement
is true, complete and correct.
ASARCO INCORPORATED
By /s/ Francis R. McAllister
-----------------------------
Name: Francis R. McAllister
Title: Chairman and Chief
Executive Officer
Dated: October 8, 1999
EXHIBIT INDEX
Exhibit 30. Agreement and Plan of Merger, dated as of October 5, 1999,
among Phelps Dodge, AAV Corporation and ASARCO.
(Incorporated by reference to Exhibit 99.1 to the Current
Report on Form 8-K of ASARCO, filed with the Commission on
October 6, 1999)
Exhibit 31. ASARCO press release, dated October 6, 1999. (Incorporated
by reference to Exhibit 99.2 to the Current Report on Form
8-K of ASARCO, filed with the Commission on October 6,
1999)
Exhibit 32. Opinion of Credit Suisse First Boston Corporation, dated
October 5, 1999.
Exhibit 33. Letter from ASARCO to Phelps Dodge, dated October 8, 1999.
Exhibit 34. Press release of ASARCO, dated October 8, 1999.
[Letterhead of Credit Suisse First Boston Corporation]
October 5, 1999
Board of Directors
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock of ASARCO
Incorporated ("ASARCO"), other than Phelps Dodge Corporation ("Phelps
Dodge") and its affiliates, of the Consideration (as defined below) to be
received by such holders pursuant to the Agreement and Plan of Merger,
dated as of October 5, 1999 (the "Merger Agreement" ), by and among Phelps
Dodge, AAV Corporation, a wholly owned subsidiary of Phelps Dodge ("Sub"),
and ASARCO. The Merger Agreement provides for, among other things, (i) an
exchange offer by Sub to acquire all of the outstanding shares of the
common stock, no par value, of ASARCO (the "ASARCO Common Stock") in
exchange for, at the election of the holder thereof and subject to certain
proration procedures set forth in the Merger Agreement (as to which we
express no opinion), either (A) $29.50 per share, net to the seller in cash
(the "Cash Consideration") or (B) 0.50266 of a share (the "Stock
Consideration" and, together with the Cash Consideration, the "Exchange
Offer Consideration") of the common stock, par value $6.25 per share, of
Phelps Dodge (the "Phelps Dodge Common Stock" and, such exchange offer, the
"Exchange Offer") and (ii) subsequent to the Exchange Offer, the merger of
Sub with and into ASARCO (the "Merger" and, together with the Exchange
Offer, the "Transaction") pursuant to which each outstanding share of
ASARCO Common Stock not acquired in the Exchange Offer will be converted
into the right to receive the Cash Consideration, the Stock Consideration
or a combination thereof (collectively, the "Merger Consideration" and,
together with the Exchange Offer Consideration, the "Consideration"),
subject to certain proration procedures set forth in the Merger Agreement
(as to which we express no opinion). Pursuant to the terms of the Merger
Agreement, a maximum of 0.25133120 of a share of Phelps Dodge Common Stock
and $14.75 in cash on a fully prorated basis will be issued in the
Transaction for each outstanding share of ASARCO Common Stock.
In arriving at our opinion, we have reviewed and considered the Merger
Agreement and certain publicly available business and financial information
relating to ASARCO and Phelps Dodge. We have evaluated Phelps Dodge both
before and after giving effect to its proposed transaction with Cyprus Amax
Minerals Company, and, where applicable, references to Phelps Dodge in this
opinion relate to Phelps Dodge both before and after giving effect to such
transaction. We have also reviewed certain other information relating to
ASARCO, including financial forecasts, provided to or discussed with us by
ASARCO, and have met with the management of ASARCO to discuss the
businesses and prospects of ASARCO and Phelps Dodge. We have also
considered certain financial and stock market data of ASARCO and Phelps
Dodge, and we have compared those data with similar data for other publicly
held companies in businesses similar to ASARCO and Phelps Dodge, and we
have considered, to the extent publicly available, the financial terms of
certain other business combinations and other transactions which have
recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verifica tion of any of the foregoing information and we have
relied on such information being complete and accurate in all material
respects. With respect to the financial forecasts provided to or discussed
with us by the management of ASARCO, you have informed us, and we have
assumed, that such forecasts have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of ASARCO as to the future financial performance of ASARCO and
Phelps Dodge and the strategic benefits and potential synergies (including
the amount, timing and achievability thereof) anticipated to result from
the proposed Transaction. We have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of ASARCO or Phelps Dodge, nor have we been
furnished with any such evaluations or appraisals. As you are aware, we
have not had access to non-public information regarding Phelps Dodge, nor
have we had an opportunity to conduct customary due diligence with respect
to business, financial or other information relating to Phelps Dodge. Our
opinion is necessarily based upon information available to us, and
financial, economic, market and other conditions as they exist and can be
evaluated, on the date hereof. We are not expressing any opinion as to
what the value of the Phelps Dodge Common Stock actually will be when
issued pursuant to the proposed Transaction or the prices at which the
Phelps Dodge Common Stock will trade subsequent to the proposed
Transaction.
We are acting as financial advisor to ASARCO in connection with the
Transaction and will receive a fee for our services, a significant portion
of which is contingent upon consummation of the Transaction. We also will
receive a fee upon delivery of this opinion. We in the past have provided,
and currently are providing, financial services to ASARCO unrelated to the
proposed Transaction, for which services we have received, and may receive,
compensation. In the ordinary course of business, Credit Suisse First
Boston and its affiliates may actively trade the debt and equity securities
of both ASARCO and Phelps Dodge for their own accounts and for the accounts
of customers and, accordingly, may at any time hold long or short positions
in such securities.
It is understood that this letter is for the information of the Board of
Directors of ASARCO in connection with its consideration of the proposed
Transaction, does not constitute a recommendation to any stockholder as to
whether such stockholder should exchange shares of ASARCO Common Stock in
the Exchange Offer, the form of Consideration to be elected by any
stockholder in the Exchange Offer or how any such stockholder should vote
with respect to any matter relating to the Merger. This letter is not to
be q uoted or referred to, in whole or in part, in any registration
statement, prospectus or proxy statement, or in any other document used in
connection with the offering or sale of securities, nor shall this letter
be used for any other purposes, without our prior written consent, except
that this letter may be attached in its entirety as an exhibit to ASARCO's
Schedule 14D-9 relating to the Exchange Offer.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received in the Transaction by the
holders of ASARCO Common Stock (other than Phelps Dodge and its affiliates)
is fair, from a financial point of view, to such holders.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
[LETTERHEAD OF ASARCO INCORPORATED]
October 8, 1999
Douglas C. Yearley
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, Arizona 85004-3014
Re: Phelps Dodge/Asarco Merger Agreement
Dear Doug:
Reference is made to the Agreement and Plan of Merger, dated as
of October 5, 1999 (the "Merger Agreement"), among Phelps Dodge Corporation
("Phelps Dodge"), AAV Corporation and ASARCO Incorporated ("ASARCO").
Pursuant to Section 5.9(b) of the Merger Agreement, you are
hereby advised that the Board of Directors of ASARCO met on October 8, 1999
to consider the revised proposal from Grupo MExico, a copy of which we sent
to you yesterday. At the meeting, the ASARCO Board of Directors
considered, together with advice from its financial and legal advisors, (i)
the terms of Grupo MExico's revised offer, (ii) ASARCO's rights and
obligations under the Merger Agreement and (iii) its fiduciary duties to
stockholders of ASARCO under applicable law. At the October 8, 1999
meeting, in accordance with the terms of the Merger Agreement, the Board of
Directors determined in good faith, after consultation with its legal and
financial advisors, that it was necessary in order to comply with its
fiduciary duties under applicable law (x) to modify its recommendation of
the Phelps Dodge Offer and Merger, and (y) if necessary, to furnish
information to Grupo MExico pursuant to a customary confidentiality
agreement and to participate in discussions or negotiations regarding the
Grupo MExico revised proposal.
Sincerely,
Francis R. McAllister
cc: David W. Heleniak
Shearman & Sterling
Michael W. Blair
Debevoise & Plimpton
FOR IMMEDIATE RELEASE
ASARCO TO CONSIDER GRUPO MEXICO OFFER
NEW YORK, N.Y., OCTOBER 8, 1999 - ASARCO Incorporated (NYSE:AR) announced
that the Board of Directors of Asarco met to consider the revised proposal
contained in a letter from Grupo Mexico of October 7, 1999. In its revised
proposal, Grupo Mexico offered to acquire all of the outstanding shares of
Asarco common stock at a price of $29.50 per share in cash.
At the meeting, the Asarco Board of Directors considered, together with
advice from its financial and legal advisors, the terms of Grupo Mexico's
revised offer, Asarco's rights and obligations under the Phelps Dodge
merger agreement and its fiduciary duties to stockholders of Asarco under
applicable law. In accordance with the terms of its merger agreement with
Phelps Dodge, the Board of Directors determined in good faith, after
consultation with its legal and financial advisors, that it was necessary
in order to comply with its fiduciary duties under the applicable law to
modify its recommendation of the pending transaction with Phelps Dodge and,
if necessary, to furnish information to Grupo Mexico pursuant to a
customary confidentiality agreement and to participate in discussions or
negotiations regarding the Grupo Mexico revised proposal. The Board has
notified Phelps Dodge that it intends to participate in discussions with
Grupo Mexico concerning the proposal. Accordingly, the Asarco Board
recommends that stockholders not tender their shares in the Phelps Dodge
Exchange Offer at this time.
###
