<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PHELPS DODGE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW YORK 3330 13-1808503
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION CLASSIFICATION CODE NUMBER) NUMBER)
OR ORGANIZATION)
</TABLE>
------------------------
S. DAVID COLTON, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
PHELPS DODGE CORPORATION
2600 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004-3014
(602) 234-8100
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL W. BLAIR, ESQ. STEPHEN R. VOLK, ESQ.
DEBEVOISE & PLIMPTON DAVID W. HELENIAK, ESQ.
875 THIRD AVENUE SHEARMAN & STERLING
NEW YORK, NY 10022 599 LEXINGTON AVENUE
(212) 909-6000 NEW YORK, NY 10022
(212) 848-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $6.25 per
share(3)....................... 28,357,361 shares Not Applicable $1,455,745,672 $404,698
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</TABLE>
(1) Represents the maximum number of shares of Phelps Dodge Corporation common
stock issuable upon consummation of the exchange offer for shares of Cyprus
Amax Minerals Company common stock based on the number of Cyprus Amax common
shares outstanding on August 3, 1999, as reported in Cyprus Amax's quarterly
report on Form 10-Q for the period ended June 30, 1999.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rules 457(f)(1) and 457(c) under the Securities Act of 1933,
based upon the average of the high and low prices of Cyprus Amax common
shares as reported on the New York Stock Exchange Composite Tape on August
20, 1999.
(3) Includes Phelps Dodge preferred share purchase rights which, until events
specified in Phelps Dodge's stockholder rights plan occur, will not be
exercisable or evidenced separately from the common stock of Phelps Dodge.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated August 27, 1999
LOGO
Phelps Dodge Corporation
Offer to Exchange Each Outstanding Share of Common Stock
(Including Associated Preferred Share Purchase Rights)
of
Cyprus Amax Minerals Company
For 0.3135 Shares of Common Stock
of
Phelps Dodge Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON , 1999 UNLESS EXTENDED. SHARES TENDERED PURSUANT TO
THIS OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER.
We are offering to exchange 0.3135 shares of Phelps Dodge common stock for
each outstanding share of common stock of Cyprus Amax Minerals Company that is
validly tendered and not properly withdrawn. We are also making a separate offer
to exchange 0.4098 shares of Phelps Dodge common stock for each outstanding
share of common stock of ASARCO Incorporated.
We have proposed a business combination of Phelps Dodge, Cyprus Amax and
Asarco, pursuant to which all outstanding Cyprus Amax shares and Asarco shares
would be exchanged for Phelps Dodge shares. We believe our proposed business
combination would be far more favorable to you and to Asarco shareholders than
the proposed two-party Asarco-Cyprus Amax merger announced in July 1999.
However, despite our repeated requests, the management and Boards of Directors
of Cyprus Amax and Asarco have been unwilling to meet with us to discuss our
proposed business combination. For this reason, we are making offers directly to
the shareholders of Cyprus Amax and Asarco to exchange their shares for Phelps
Dodge shares.
Our obligation to exchange Phelps Dodge common stock for Cyprus Amax common
stock is subject to the conditions listed under "The Offer -- Conditions of Our
Offer." Our offer to Cyprus Amax shareholders is not, however, conditioned on
the success of our offer to Asarco shareholders, nor is our offer to Asarco
shareholders conditioned on the success of our offer to Cyprus Amax
shareholders.
Phelps Dodge's common stock trades on the New York Stock Exchange under the
symbol "PD."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. Any solicitation of proxies will be made only pursuant to separate proxy
solicitation materials complying with the requirements of Section 14(a) of the
Securities Exchange Act of 1934.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The Dealer Manager for the Offer is
MORGAN STANLEY DEAN WITTER
-------------------------
The date of this prospectus is , 1999
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION........ iii
WHERE YOU CAN FIND MORE INFORMATION......................... v
SUMMARY..................................................... 1
The Proposed Combination.................................. 1
Reasons for the Proposed Combination...................... 1
The Offer................................................. 3
The Companies............................................. 4
Risk Factors.............................................. 5
RISK FACTORS................................................ 6
Benefits of the Combination May Not Be Realized........... 6
Fixed Exchange Ratio of Our Offer Could Work to Your
Disadvantage........................................... 6
Copper Price Volatility May Reduce Income................. 7
Environmental and Regulatory Compliance May Impose
Substantial Costs...................................... 8
Operations Outside the United States Are Subject to
Risks.................................................. 10
Mining Is Subject to Risks................................ 10
Reserve Levels Are Subject To Uncertainty................. 11
Year 2000 Poses Potential Risks........................... 11
THE PROPOSED COMBINATION.................................... 13
REASONS FOR THE PROPOSED COMBINATION........................ 14
BACKGROUND OF THE OFFER..................................... 16
THE OFFER................................................... 32
Timing of Our Offer....................................... 33
Litigation................................................ 33
Extension, Termination and Amendment...................... 34
Exchange of Cyprus Amax Shares; Delivery of Phelps Dodge
Common Stock........................................... 35
Cash Instead of Fractional Shares of Phelps Dodge Common
Stock.................................................. 35
Withdrawal Rights......................................... 35
Procedure for Tendering................................... 36
Material U.S. Federal Income Tax Consequences............. 39
Effect of Offer on Market for Cyprus Amax Shares;
Registration Under the Exchange Act.................... 40
Purpose of Our Offer; the Phelps Dodge/Cyprus Amax
Merger................................................. 41
Conditions of Our Offer................................... 43
Relationships with Cyprus Amax............................ 46
Fees and Expenses......................................... 47
Accounting Treatment...................................... 47
Stock Exchange Listings................................... 47
THE COMPANIES............................................... 48
Phelps Dodge Corporation.................................. 48
ASARCO Incorporated....................................... 48
Cyprus Amax Minerals Company.............................. 49
MARKET PRICES AND DIVIDENDS................................. 50
PHELPS DODGE CORPORATION SELECTED HISTORICAL FINANCIAL
DATA...................................................... 51
ASARCO INCORPORATED SELECTED HISTORICAL FINANCIAL DATA...... 52
CYPRUS AMAX MINERALS COMPANY SELECTED HISTORICAL FINANCIAL
DATA...................................................... 54
COMPARATIVE PER SHARE DATA.................................. 56
</TABLE>
i
<PAGE> 4
<TABLE>
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PAGE
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<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 58
DESCRIPTION OF PHELPS DODGE CAPITAL STOCK................... 77
Authorized Capital Stock.................................. 77
Phelps Dodge Common Stock................................. 77
Phelps Dodge Preferred Stock.............................. 77
Transfer and Dividend Paying Agent and Registrar.......... 77
COMPARISON OF RIGHTS OF HOLDERS OF PHELPS DODGE SHARES AND
CYPRUS AMAX SHARES........................................ 78
Comparison of Charter and By-law Provisions............... 78
Comparison of Certain Statutory Provisions................ 84
ASARCO AND CYPRUS AMAX INFORMATION.......................... 87
FORWARD-LOOKING INFORMATION................................. 87
LEGAL MATTERS............................................... 88
EXPERTS..................................................... 88
SCHEDULE A -- DIRECTORS AND OFFICERS OF PHELPS DODGE
CORPORATION............................................... A-1
</TABLE>
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT PHELPS DODGE THAT IS NOT INCLUDED IN OR DELIVERED WITH THE PROSPECTUS.
THAT INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR ORAL
REQUEST. YOU MUST ADDRESS YOUR REQUEST TO CORPORATE SECRETARY, PHELPS DODGE
CORPORATION, 2600 NORTH CENTRAL AVENUE, PHOENIX, ARIZONA 85004-3014, TELEPHONE
(602) 234-8598. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO
LATER THAN , 1999.
ii
<PAGE> 5
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION
Q: WHAT IS PHELPS DODGE PROPOSING?
A: We are proposing a three-way combination of Phelps Dodge, Cyprus Amax and
Asarco, pursuant to which all outstanding Cyprus Amax common shares and
Asarco common shares would be exchanged for Phelps Dodge shares. We are
making our offer to you through our wholly owned subsidiary, CAV
Corporation, which is a Delaware corporation.
Q: WHAT WOULD I RECEIVE IN EXCHANGE FOR MY SHARES?
A: We are offering 0.3135 Phelps Dodge shares for each Cyprus Amax common
share. We are separately offering 0.4098 Phelps Dodge common shares for each
Asarco common share. You will not receive any fractional Phelps Dodge
shares. Instead, you will receive cash in an amount equal to the market
value of any fractional Phelps Dodge shares you would otherwise have been
entitled to receive.
Q: WILL I BE TAXED ON THE PHELPS DODGE SHARES I RECEIVE?
A: No. We expect the transaction to be tax-free to Cyprus Amax shareholders.
Q: WHY IS PHELPS DODGE MAKING THIS OFFER?
A: We made several requests to meet with Cyprus Amax and Asarco to discuss our
proposal, but the management and boards of Cyprus Amax and Asarco have
refused to meet with us. That's why we are making this offer directly to
you, the shareholders.
Q: WHY WON'T CYPRUS AMAX AND ASARCO MEET WITH YOU?
A: We don't know. In July, Cyprus Amax and Asarco announced that they had
agreed to combine. They told us they were not at liberty to have discussions
with us because of their merger agreement. But they could amend or waive
those provisions. We believe our proposed three-way combination is far more
favorable to you than a two-way combination of Cyprus Amax and Asarco.
Q: WHY IS YOUR THREE-WAY COMBINATION BETTER THAN THE PROPOSED CYPRUS
AMAX-ASARCO MERGER?
A: There are several reasons:
- We're offering a substantial premium for your shares, which in effect
represents an up-front payment to you for the cost savings we expect to
achieve.
- We plan to continue Phelps Dodge's $2.00 per share annual dividend, which
means you would receive a dividend increase to 4.1 times the level planned
under the proposed Asarco-Cyprus Amax merger.
- We believe that under our leadership, we will be able to optimize the
combined operations of the three companies and deliver superior returns on
invested capital throughout the entire copper cycle. You would participate
in the greater upside potential of the combined entity, through your
ownership of Phelps Dodge shares.
Q: WHAT ARE THE CONDITIONS TO YOUR OFFER?
A: Our offer is subject to several conditions, including:
- tender of at least a majority of Cyprus Amax's shares;
- shareholders of Cyprus Amax not approving the Asarco/Cyprus Amax merger or
the Asarco/Cyprus Amax merger agreement being otherwise terminated;
- making Cyprus Amax's "poison pill" shareholder rights plan inapplicable to
our offer;
- Cyprus Amax's board having taken action so that Delaware's anti-takeover
statute and the "Fair Price" provision of Cyprus Amax's charter are
inapplicable to our offer;
- our stockholders having approved the issuance of our stock pursuant to our
offer; and
- clearance under U.S. antitrust laws.
iii
<PAGE> 6
These conditions and other conditions to our offer are discussed in this
prospectus under "The Offer -- Conditions of Our Offer."
Q: HOW IS YOUR CYPRUS AMAX OFFER RELATED TO YOUR ASARCO OFFER?
A: While we would prefer to combine all three companies, the two offers are
separate, and neither is conditioned on the other.
Q: HOW WOULD YOU GO ABOUT COMPLETING YOUR PROPOSED ACQUISITION?
A: Once we acquire shares in the offer, we plan to have our wholly owned
subsidiary CAV Corporation merge with Cyprus Amax, so that Cyprus Amax would
become a wholly owned subsidiary of Phelps Dodge.
Q: HOW LONG WILL IT TAKE TO COMPLETE YOUR PROPOSED COMBINATION?
A: If Asarco and Cyprus Amax promptly cooperate, the combination could be
completed early in the fourth quarter of this year. However, Asarco and
Cyprus may try to delay our offer. We are firmly committed to our proposal,
and intend to see it through. By tendering your shares, you will be sending
a message to Cyprus Amax's management and board that you want Cyprus Amax to
participate in a combination with Phelps Dodge.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT PHELPS DODGE, ASARCO AND CYPRUS
AMAX?
A: You can find more information about Phelps Dodge, Asarco and Cyprus Amax
from various sources described under "Where You Can Find More Information"
on page v.
Q: HOW DO I PARTICIPATE IN YOUR OFFER?
A: To tender your shares, you should do the following:
- If you hold your shares in your own name, complete and sign the enclosed
letter of transmittal and return it with your share certificates to [ ],
the exchange agent for the offer, at [address].
- If you hold your shares in "street name" through a broker, ask your broker
to tender your shares.
Q: WHAT SHOULD I DO IF I HAVE QUESTIONS?
A: If you have any questions about our offer or the proposed combination of
Phelps Dodge, Asarco and Cyprus Amax, please call our information agent,
Innisfree M&A Incorporated, toll-free at 1-877-750-5838.
iv
<PAGE> 7
WHERE YOU CAN FIND MORE INFORMATION
Phelps Dodge, Asarco and Cyprus Amax file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission (the SEC). You may read and copy any reports, statements or other
information we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the SEC's public reference rooms in New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC at www.sec.gov. Phelps Dodge
filed a Registration Statement on Form S-4 to register with the SEC the Phelps
Dodge common shares to be issued pursuant to our offer. This prospectus is a
part of that Registration Statement. As allowed by SEC rules, this prospectus
does not contain all the information you can find in the Registration Statement
or the exhibits to the Registration Statement.
Before we commence our offer, we will file with the SEC a statement on
Schedule 14D-1 pursuant to rule 14d-3 under the Securities Exchange Act of 1934
furnishing certain information about our offer. You may read and copy the
Schedule 14D-1 (and any amendments to it) at the SEC's public reference room in
Washington, D.C. referred to above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that
Phelps Dodge, Asarco or Cyprus Amax have previously filed with the SEC. These
documents contain important information about Phelps Dodge, Asarco and Cyprus
Amax and their financial condition.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST TO: CORPORATE SECRETARY, PHELPS DODGE CORPORATION, 2600 NORTH CENTRAL
AVENUE, PHOENIX, AZ 85004-3014, TELEPHONE (602) 234-8598. IN ORDER TO ENSURE
TIMELY DELIVERY, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NO LATER THAN
[DATE].
The following documents filed with the SEC by Phelps Dodge are
incorporated herein by reference:
(i) Phelps Dodge's Annual Report on Form 10-K for the year ended
December 31, 1998;
(ii) Phelps Dodge's Proxy Statement for the Annual Meeting of
Stockholders held on May 5, 1999;
(iii) Phelps Dodge's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999;
(iv) Phelps Dodge's Annual Report on Form 11-K for the fiscal year
ended December 31, 1998; and
(v) Phelps Dodge's Current Reports on Form 8-K dated August 23, 1999
and August 26, 1999.
The following documents filed with the SEC by Asarco are incorporated
herein by reference:
(i) Asarco's Annual Report on Form 10-K for the year ended December
31, 1998 (except for the
report of Asarco's independent accountants contained therein which is not
incorporated herein by reference because the consent of Asarco's independent
accountants has not yet been obtained);
(ii) Asarco's Proxy Statement for the Annual Meeting of Shareholders
held on April 28, 1999;
(iii) Asarco's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1999 and June 30, 1999; and
(iv) Asarco's Current Report on Form 8-K dated July 20, 1999.
v
<PAGE> 8
The following documents filed with the SEC by Cyprus Amax are incorporated
herein by reference:
(i) Cyprus Amax's Annual Report on Form 10-K for the year ended
December 31, 1998 (except for the report of Cyprus Amax's independent
accountants contained therein which is not incorporated herein by reference
because the consent of Cyprus Amax's independent accountants has not yet
been obtained);
(ii) Cyprus Amax's Proxy Statement for the Annual Meeting of
Shareholders held on May 6, 1999;
(iii) Cyprus Amax's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999; and
(iv) Cyprus Amax's Current Reports on Form 8-K dated July 21, 1999,
July 14, 1999 and February 24, 1999.
All documents filed by Phelps Dodge, Asarco or Cyprus Amax pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 from
the date of this prospectus to the date that shares are accepted for exchange
pursuant to our offer (or the date that our offer is terminated) shall also be
deemed to be incorporated herein by reference.
vi
<PAGE> 9
SUMMARY
This summary highlights selected information from this prospectus, and may
not contain all of the information that is important to you. To better
understand the proposed Phelps Dodge/Asarco/Cyprus Amax combination and our
separate offers to the shareholders of Asarco and Cyprus Amax, you should read
this entire document carefully, as well as those additional documents to which
we refer you. See "Where You Can Find More Information" on page v.
THE PROPOSED COMBINATION
We are proposing a three-way business combination of Phelps Dodge
Corporation (Phelps Dodge), ASARCO Incorporated (Asarco) and Cyprus Amax
Minerals Company (Cyprus Amax). We are offering to exchange all of the
outstanding Cyprus Amax common shares for Phelps Dodge common shares at an
exchange ratio of 0.3135 Phelps Dodge common shares for each Cyprus Amax common
share. We are also separately offering to exchange all of the outstanding Asarco
common shares for Phelps Dodge common shares at an exchange ratio of 0.4098
Phelps Dodge common shares for each Asarco common share.
In July 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies. We believe our proposed three-way business combination
is much more valuable to shareholders of Asarco and Cyprus Amax than the
proposed two-party Asarco-Cyprus Amax merger, based on:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to you for the substantial cost savings we expect to
achieve;
- our plan to continue Phelps Dodge's current $2.00 per share dividend,
resulting in a substantial dividend increase for Asarco and Cyprus Amax
shareholders to more than quadruple the level contemplated in the
proposed Asarco-Cyprus Amax merger; and
- your opportunity to participate in the greater upside potential of the
combined company through the ownership of Phelps Dodge common stock.
However, despite our repeated requests, the management and Boards of
Directors of Asarco and Cyprus Amax have been unwilling to meet with us to
discuss our proposed business combination. For this reason, we are making these
offers directly to the shareholders of Asarco and Cyprus Amax. See "Background
of the Offer" beginning on page 16.
We would prefer to combine all three companies. However, our offer to
Cyprus Amax shareholders is not conditioned on the success of our offer to
Asarco shareholders, nor is our offer to Asarco shareholders conditioned on the
success of our offer to Cyprus Amax shareholders. See "The Offer" beginning on
page 32.
REASONS FOR THE PROPOSED COMBINATION
We believe that our proposed combination of Phelps Dodge, Asarco and Cyprus
Amax presents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to deliver superior
results in all business cycles. In addition to the substantial dividend increase
for Asarco and Cyprus Amax shareholders, we believe that the combination of
Phelps Dodge, Asarco and Cyprus Amax will produce the following benefits:
- Substantial premium. The exchange ratios we are offering imply
significant premiums for Cyprus Amax and Asarco shareholders based on
market prices of Phelps Dodge, Cyprus Amax and Asarco common stock before
our proposal was first publicly announced.
- Accretion to cash flow and earnings. The combination would result in
immediate and substantial accretion to the cash flow of the combined
company. We expect the combination to result in significant accretion to
earnings per share of the combined company beginning in the second year
after closing, assuming copper prices of $0.80 -- $0.85 per pound in
2001.
1
<PAGE> 10
- Ability to integrate operations. We expect the combined company to have
significantly greater ability to integrate southwest U.S. mining
operations, administrative functions in the U.S., Chile and Peru, and
worldwide exploration and development activities.
- Management strength. The combined company would have a strong and deep
management team, at both the operating and corporate levels, with strong
credibility in the marketplace.
- Cost savings. We expect to achieve annual cash cost savings of at least
$200 million by the end of the second year after closing, as a result of
reductions in overhead, purchasing, exploration and other expenses. We
also expect at least another $65 million in annual savings from lower
depreciation expenses, bringing the total annual savings to at least
$265 million. These cost savings are based on public information and our
expectation that we can deliver at least $75 million in incremental
savings above the cash synergy figure of $125 million projected in the
proposed Asarco-Cyprus Amax merger. This does not include any cost
savings from the rationalization of high-cost production during periods
of low copper prices.
- Operating leverage. The combined company would have tremendous
operating leverage, together with enough diversity in other businesses
to mitigate cyclical downturns.
- Superior production capability. The total annual copper production of
the combined company would be approximately 3.8 billion pounds at
current levels, with total attributable copper reserves of approximately
80 billion recoverable pounds.
- Increased competitiveness. The combined company would have increased
ability to compete for world-class projects.
- Reduced capital expenditures. By combining their businesses, Phelps
Dodge, Asarco and Cyprus Amax would be able to reduce capital
expenditures.
- Financial strength. The company would have a strong, liquid balance
sheet, with excellent access to capital.
See "Reasons for the Proposed Combination" beginning on page 14.
2
<PAGE> 11
THE OFFER
SUMMARY OF THE OFFER
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related letter of transmittal, to exchange 0.3135
shares of Phelps Dodge common stock for each outstanding share of common stock
of Cyprus Amax that is validly tendered on or prior to the expiration date and
not properly withdrawn. We are making our offer through our wholly owned
subsidiary, CAV Corporation, which is a Delaware corporation. The term
"expiration date" means 12:00 midnight, New York City time, on ,
1999, unless we extend the period of time for which this offer is open, in which
case the term "expiration date" means the latest time and date on which the
offer, as so extended, expires. We are also making a separate offer to exchange
0.4098 shares of Phelps Dodge common stock for each outstanding share of common
stock of Asarco.
CONDITIONS OF THE OFFER
Our obligation to exchange shares of Phelps Dodge common stock for Cyprus
Amax shares pursuant to the offer is subject to several conditions referred to
below under "The Offer -- Conditions of Our Offer," including conditions as to
the minimum number of shares tendered, making Cyprus Amax's shareholder rights
plan, the "Fair Price" provisions in Cyprus Amax's charter and Delaware's
anti-takeover statute inapplicable to our offer, approval by our stockholders,
U.S. antitrust clearance, and other conditions that are discussed below.
TIMING OF THE OFFER
Our offer is currently scheduled to expire on , 1999;
however, we currently intend to extend our offer from time to time as necessary
until all the conditions to the offer have been satisfied or waived. See "The
Offer -- Extension, Termination and Amendment."
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right, in our sole discretion, at any time or from
time to time, to extend the period of time during which our offer remains open,
and we can do so by giving oral or written notice of such extension to the
exchange agent. If we decide to extend our offer, we will make an announcement
to that effect no later than 9:00 A.M., New York City time, on the next business
day after the previously scheduled expiration date. We are not making any
assurance that we will exercise our right to extend our offer, although we
currently intend to do so until all conditions have been satisfied or waived.
During any such extension, all Cyprus Amax shares previously tendered and not
withdrawn will remain subject to the offer, subject to your right to withdraw
your Cyprus Amax shares.
Subject to the SEC's applicable rules and regulations, we also reserve the
right, in our sole discretion, at any time or from time to time, (a) to delay
our acceptance for exchange or our exchange of any Cyprus Amax shares pursuant
to our offer, regardless of whether we previously accepted Cyprus Amax shares
for exchange, or to terminate our offer and not accept for exchange or exchange
any Cyprus Amax shares not previously accepted for exchange or exchanged, upon
the failure of any of the conditions of the offer to be satisfied and (b) to
waive any condition (other than the condition relating to the Phelps Dodge
stockholder approval, the condition relating to U.S. antitrust clearance, the
condition relating to the effectiveness of the registration statement for the
Phelps Dodge shares to be issued in our offer and, following Phelps Dodge
Stockholder approval, receipt of the legal opinion referred to below) or
otherwise to amend the offer in any respect, by giving oral or written notice of
such delay, termination or amendment to the exchange agent and by making a
public announcement. We will follow any extension, termination, amendment or
delay, as promptly as practicable, with a public announcement. In the case of an
extension, any such announcement will be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Securities Exchange Act of 1934, which require that any
material change in the information published, sent or given to the stockholders
in connection with the offer be promptly sent to stockholders in a manner
reasonably
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<PAGE> 12
designed to inform stockholders of such change) and without limiting the manner
in which we may choose to make any public announcement, we assume no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by making a release to the Dow Jones News Service.
EXCHANGE AND SHARES; DELIVERY OF PHELPS DODGE COMMON STOCK
Upon the terms and subject to the conditions of our offer (including, if
our offer is extended or amended, the terms and conditions of any such extension
or amendment), Phelps Dodge will accept for exchange, and will exchange, shares
validly tendered and not properly withdrawn as promptly as practicable after the
expiration date.
WITHDRAWAL RIGHTS
Your tender of Cyprus Amax shares pursuant to the offer is irrevocable,
except that Cyprus Amax shares tendered pursuant to the offer may be withdrawn
at any time prior to the expiration date, and, unless we previously accepted
them pursuant to the offer, may also be withdrawn at any time after
1999.
PROCEDURE FOR TENDERING SHARES
For you to validly tender Cyprus Amax shares pursuant to our offer, (a) a
properly completed and duly executed letter of transmittal (or manually executed
facsimile of that document), along with any required signature guarantees, or an
agent's message, which is explained below, in connection with a book-entry
transfer, and any other required documents, must be transmitted to and received
by the exchange agent at one of its addresses set forth on the back cover of
this prospectus, and certificates for tendered Cyprus Amax shares must be
received by the exchange agent at such address or those Cyprus Amax shares must
be tendered pursuant to the procedures for book-entry tender set forth in "The
Offer" (and a confirmation of receipt of such tender received), in each case
before the expiration date, or (b) you must comply with the guaranteed delivery
procedures set forth in "The Offer."
THE COMPANIES
PHELPS DODGE CORPORATION
2600 North Central Avenue
Phoenix, AZ 85004-3014
(602) 234-8100
Phelps Dodge Corporation is among the world's largest producers of copper,
carbon black and magnet wire, and is the world's largest producer of
continuous-cast copper rod. Phelps Dodge comprises two divisions:
- Phelps Dodge Mining Company, which includes our worldwide copper
operations and worldwide mineral exploration and development programs;
and
- Phelps Dodge Industries, which includes our specialty chemicals segment
and our wire and cable segment.
As of June 30, 1999, Phelps Dodge and its subsidiaries had 13,193
employees.
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<PAGE> 13
ASARCO INCORPORATED
180 Maiden Lane
New York, NY 10038
(212) 510-2000
Asarco Incorporated, a New Jersey corporation organized in 1899, is one of
the world's leading producers of copper. Asarco also produces specialty
chemicals and aggregates. Asarco's copper business includes integrated mining,
smelting and refining operations in North America and in Peru through its 54.3%
owned subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly
owned subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing
industries. American Limestone Company, a wholly owned subsidiary, produces
construction aggregates, ready-mixed concrete and agricultural limestone. Asarco
also operates a custom lead smelting business, a zinc mining business and a
specialty metals business. Asarco owns Encycle, Inc., which operates a waste
recycling facility and Hydrometrics, an environmental consulting and
construction firm. As of June 30, 1999, Asarco and its subsidiaries employed
approximately 10,100 employees.
CYPRUS AMAX MINERALS COMPANY
9100 East Mineral Circle
Englewood, CO 80112
(303) 643-5000
Cyprus Amax Minerals Company, a Delaware corporation, is a major mining
company engaged, directly or through its subsidiaries and affiliates, in the
exploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of
molybdenum and has a significant position in gold via its 30% interest in
Kinross Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal
operations in June of 1998 and sold its lithium business in October of 1998.
Cyprus Amax sold its remaining U.S. coal operations in June 1999. Cyprus Amax
still holds its Australian coal properties. As of June 30, 1999, Cyprus Amax and
its subsidiaries employed approximately 4,600 employees.
RISK FACTORS
In deciding whether to tender your shares pursuant to our offer, you should
read carefully this prospectus and the documents to which we refer you. You
should also carefully consider the following factors:
- the risks associated with integrating Asarco and Cyprus Amax into our
company, including the risk that the amount and timing of the cost
savings and other expected benefits from the business combination may be
different from what we expect;
- the fixed exchange ratio of our offer, which may work to your
disadvantage if Cyprus Amax stock increases in value or Phelps Dodge
stock decreases in value;
- the fact that we may not be able to complete business combinations with
both Asarco and Cyprus Amax, which would reduce the expected cost savings
and other benefits, and would likely cause additional transaction
expenses;
- the volatility of copper prices;
- the extensive governmental regulations, including regulations relating to
environmental matters, to which Phelps Dodge, Asarco and Cyprus Amax are
subject;
- the risks associated with conducting operations outside the United
States, especially in less developed countries;
- the risks associated with mining;
- the fact that reserve levels are subject to uncertainties; and
- potential risks associated with the Year 2000.
See "Risk Factors" beginning on the following page for a more complete
discussion of these factors.
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<PAGE> 14
RISK FACTORS
In deciding whether to tender your shares pursuant to our offer, you should
read carefully this prospectus and the documents to which we refer you. You
should also carefully consider the following factors:
BENEFITS OF THE COMBINATION MAY NOT BE REALIZED
If we complete the proposed Phelps Dodge/Asarco/Cyprus Amax business
combination, we will integrate three companies that have previously operated
independently. This will involve integrating:
- corporate headquarters and mining administration offices;
- worldwide exploration and development activities;
- mining operations, particularly in the southwestern United States; and
- administrative functions in the U.S., Chile and Peru.
We may not be able to integrate the operations of Asarco and Cyprus Amax without
encountering difficulties. The diversion of the attention of management to the
integration effort and any difficulties encountered in combining operations
could adversely affect the combined company's businesses. Although we expect at
least $200 million in annual cash cost savings from the combination by the end
of the second year (excluding any savings from rationalizations of high-cost
production during periods of low copper prices), together with $65 million in
annual savings from lower depreciation expenses, we cannot be sure that we will
be able to achieve them in the amounts expected or as quickly as we now expect.
Actual cost savings may be higher or lower than we currently expect, and may
take a longer or shorter time to achieve than we currently expect. Our estimates
concerning the amount and timing of cost savings have been developed by our
management and reflect our best judgment based on publicly available information
about Asarco and Cyprus Amax.
More generally, our views about the expected benefits of our proposed
combination are based on publicly available information about Asarco and Cyprus
Amax. Those companies may have other information, not available to us, that
would significantly affect our estimates or views.
Because our offers to acquire Asarco and Cyprus Amax are separate, and
neither offer is dependent on the success of the other, it is possible that one
of the following scenarios will occur:
- we will acquire Asarco, but not Cyprus Amax;
- we will acquire Cyprus Amax, but not Asarco; or
- we will acquire both Asarco and Cyprus Amax, but it will take us much
longer to acquire one company than the other.
In any of these cases, the cost savings we expect from the combination will be
less than if all three companies combined promptly. If we acquire only one of
Asarco or Cyprus Amax, we may still encounter difficulties in integrating its
operations, and may not be able to achieve the cost savings we expect in the
amounts or time periods anticipated. In addition, under the terms of the July
15, 1999 merger agreement between Asarco and Cyprus Amax, Asarco or Cyprus Amax
would be required to pay a $45 million fee to the other party if, after its
shareholders voted against the Asarco/Cyprus Amax merger, it terminated the
agreement in order to enter into a business combination with Phelps Dodge. This
fee would not be payable, however, if shareholders of both Asarco and Cyprus
Amax vote not to approve that transaction.
FIXED EXCHANGE RATIO OF OUR OFFER COULD WORK TO YOUR DISADVANTAGE
We are offering to exchange shares of Phelps Dodge common stock for shares
of Cyprus Amax common stock at a fixed ratio of 0.3135 shares of Phelps Dodge
common stock for each share of Cyprus Amax common stock. Once you have tendered
your stock and your withdrawal rights have expired, you will be locked into that
exchange ratio, you will not be able to capture gains from possible increases in
value of Cyprus Amax common
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<PAGE> 15
stock, and, while you may benefit from possible increases in value of Phelps
Dodge common stock, you may incur losses from possible decreases in value of
Phelps Dodge common stock.
COPPER PRICE VOLATILITY MAY REDUCE INCOME
Copper is an internationally traded commodity. Its prices are effectively
determined on the two major metals exchanges -- New York Mercantile Exchange
(COMEX) and London Metal Exchange (LME). The prices on these exchanges reflect
the worldwide balance of copper demand and supply and various domestic and
international macroeconomic and political conditions. Prices are also sometimes
influenced significantly by numerous other factors, including speculative
actions, the availability and cost of substitute materials, and currency
exchange fluctuations. The copper market is volatile and cyclical, as
illustrated by the following chart showing the high, low and average COMEX spot
price per pound of copper cathode for the years indicated:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
- ---- ------ ------ -------
<S> <C> <C> <C>
1989........................................... $ 1.55 $ 1.03 $ 1.27
1990........................................... 1.38 0.96 1.19
1991........................................... 1.20 0.96 1.05
1992........................................... 1.16 0.93 1.03
1993........................................... 1.07 0.72 0.85
1994........................................... 1.40 0.78 1.07
1995........................................... 1.46 1.21 1.35
1996........................................... 1.31 0.86 1.06
1997........................................... 1.23 0.76 1.04
1998........................................... 0.86 0.64 0.75
1999 (through August 24)....................... 0.79 0.61 0.68
</TABLE>
- ---------------
SOURCE: COMEX
On August 24, 1999, the closing spot price of copper cathode on the COMEX was
$0.76 per pound.
Any material change in the price we receive for copper, or in our unit
production costs, has a significant effect on our results. Our share of current
annual production is approximately 1.6 billion pounds of copper. Accordingly,
each 1 cent per pound change in the average annual copper price, or in average
annual unit production costs, causes a variation in annual operating income
before taxes of approximately $16 million. Following the completion of our
proposed Phelps Dodge/Asarco/Cyprus Amax combination, the combined company's
annual production would be approximately 3.8 billion pounds, based on current
levels. We estimate that each 1 cent per pound change in the average annual
copper price, or in average unit production costs, would cause a variation in
annual operating income before taxes of approximately $38 million at these
production levels.
If we combined with Cyprus Amax but not with Asarco, our combined annual
production would be approximately 2.8 billion pounds, based on current levels.
We estimate that each 1 cent per pound change in the average annual copper
price, or in average unit production costs, would cause a variation in annual
operating income before taxes of approximately $28 million at these production
levels.
While Phelps Dodge, Asarco and Cyprus Amax historically have used limited
financial risk management techniques to reduce a portion of their exposure to
the volatility of commodity market prices, there can be no assurance that the
combined company will continue to be able to do so effectively in the future. In
addition, depending upon the specific techniques employed, market conditions and
other factors, these activities could reduce the earnings or cash flow that the
combined company otherwise would realize or could result in losses.
Cyprus Amax is the world's largest producer of molybdenum, which, like
copper, is characterized by volatile and cyclical prices. Molybdenum consumption
depends heavily on worldwide demand from the specialty steel industry and, to a
lesser extent, on chemical applications. World molybdenum consumption remained
at record levels in the first half of 1998, continuing the growth trend begun in
1994. Beginning in the
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<PAGE> 16
second half of 1998, molybdenum consumption declined as a result of the economic
downturn in Asia. Overall 1998 molybdenum worldwide consumption declined an
estimated four percent primarily in metallurgical applications. The molybdenum
market remained oversupplied during the second half of 1998, and production
curtailments were announced in China and at three primary mines in North America
during the fourth quarter. The molybdenum market continued to be oversupplied in
the first half of 1999. Western World metallurgical grade molybdenum dealer
oxide prices averaged about $2.65 per pound in the first half of 1999 compared
with full-year averages of about $3.40 per pound in 1998 and about $4.30 per
pound in 1997. Cyprus Amax molybdenum realizations averaged $4.11 per pound in
the first half of 1999 compared with full-year averages of $4.95 per pound in
1998 and $5.50 per pound in 1997, with realizations positively impacted by
higher-valued molybdenum chemical products. A substantial portion of world
molybdenum production is a by-product of copper mining, which is relatively
insensitive to molybdenum price levels. Exports to the Western World, especially
from China, can also influence competitive conditions.
ENVIRONMENTAL AND REGULATORY COMPLIANCE MAY IMPOSE SUBSTANTIAL COSTS
The mining operations and exploration activities of Phelps Dodge, Asarco
and Cyprus Amax, both inside and outside the United States, are subject to
extensive laws and regulations governing prospecting, developing, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
and remediation of the environment, protection of endangered and protected
species, mine safety, toxic substances and other matters. Mining is also subject
to risks and liabilities associated with pollution of the environment and the
disposal of waste products occurring as a result of mineral exploration and
production. Compliance with these laws and regulations could impose substantial
costs and subject the combined company to significant potential liabilities.
ENVIRONMENTAL MATTERS
Our operations in the United States are subject to stringent federal, state
and local laws and regulations relating to improving or maintaining
environmental quality. Our global operations are also subject to many
environmental protection laws. Environmental laws often require parties to pay
for remedial action or to pay damages regardless of fault. Environmental laws
also often impose liability with respect to divested or terminated operations,
even if the operations were terminated or divested many years ago. The federal
Clean Air Act has had a significant impact, particularly on our smelters. Costs
associated with environmental compliance have increased over time, and we expect
these costs to continue to rise in the future.
We are subject to the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA or Superfund), as amended by the Superfund Amendments
and Reauthorization Act of 1986. Under Superfund, the Environmental Protection
Agency (EPA) has identified on its CERCLIS database approximately 35,000 sites
throughout the United States for review, ranking and possible inclusion on the
National Priorities List (NPL). The EPA has included 13 sites owned by us on the
CERCLIS database. Even though we believe that most, if not all, of the sites
identified do not qualify for listing on the NPL, we may be required to remove
hazardous waste or remediate the alleged effects of hazardous substances on the
environment. In many cases, this involves past disposal practices at sites not
owned by us. We have received notice that we are a potentially responsible party
from the EPA or individual states under CERCLA or an equivalent state law. We
are participating in environmental assessment and remediation activity at 39
sites.
At December 31, 1998, we had reserves of $106.0 million for remediation of
certain of the sites discussed above and other environmental costs. We record
liabilities for environmental expenditures when it is probable that obligations
have been incurred and the costs can be reasonably estimated. The amounts of
these liabilities are very difficult to estimate. This is due to factors such as
the unknown extent of the remedial actions that may be required. In the case of
sites not owned by us, the extent of our probable liability in proportion to the
probable liability of other parties is difficult to estimate. We have other
possible environmental liabilities that in our judgment cannot be reasonably
estimated. Losses attributable to remediation costs are reasonably possible at
other sites. Based on the information available to us, the accruals, both
individually and in the aggregate, from known environmental liabilities are not
expected to result in a material additional loss beyond that already accrued. We
cannot currently estimate the total additional loss we may incur for
environmental
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liabilities resulting from such things as frequently changing environmental
laws, regulations or agency interpretations, which are beyond our control, but
that loss could be potentially material.
The U.S. and non-U.S. operations of Asarco and Cyprus Amax are also subject
to stringent environmental laws, including CERCLA. The following excerpts are
from Asarco's quarterly report on Form 10-Q for the period ended June 30, 1999:
Reserves for closed plants and environmental matters, including mine
reclamation costs for active and closed properties, totaled $123.8 million
at June 30, 1999. Asarco anticipates that expenditures relating to these
reserves will be made over the next several years. Net cash expenditures
against these reserves for the three months ended June 30, 1999 and 1998
were $12.6 million and $25.4 million, respectively. Expenditures for the
six months ended June 30, 1999 and 1998 were $25.6 million and $40.2
million, respectively.
. . .
Asarco and certain of its subsidiaries have received notices from EPA
and other federal and state agencies that they and in most cases numerous
other parties are potentially responsible to remediate alleged hazardous
substance releases at certain sites under CERCLA or similar state laws. In
addition, Asarco and certain of its subsidiaries are defendants in lawsuits
brought under CERCLA or state laws that seek substantial damages and
remediation. Remedial action is being undertaken by Asarco at some of the
sites.
The following excerpt is from Cyprus Amax's quarterly report on Form 10-Q for
the period ended June 30, 1999:
At June 30, 1999, Cyprus Amax had accruals of approximately $252
million for expected future mine closure, reclamation, and environmental
remediation liabilities. Total reclamation costs for Cyprus Amax at the end
of current mine lives are estimated at about $253 million of which
approximately $110 million was reserved at June 30, 1999. Additionally, the
cost range of reasonably possible outcomes for sites where remediation
costs are estimable is from $120 million to $450 million, of which
approximately $142 million was accrued at June 30, 1999. Work on these
sites is expected to be substantially completed in the next several years,
subject to the inherent delays involved in the process. Remediation costs
that could not be reasonably estimated at June 30, 1999, are not expected
to have a material impact on the financial condition and ongoing operations
of Cyprus Amax.
OTHER REGULATORY MATTERS
In recent years, the U.S. Congress has considered a number of proposed
amendments to the General Mining Law of 1872 which governs mining claims and
related activities on federal lands. Although Congress has not adopted any such
legislation, it could do so in the future. If ever adopted, such legislation
could impose royalties on minerals extracted from federal lands, require payment
of fair market value for patenting federal lands, and required that patented
lands used for non-mining purposes revert to the federal government. Passage of
mining law amendments or revisions to the hardrock mining surface management
regulations could result in additional expenses in the development and operation
of new mines on federal lands.
Phelps Dodge, Asarco and Cyprus Amax are also subject to federal and state
laws and regulations pertaining to plant and mine safety and health conditions.
These laws include the Occupational Safety and Health Act of 1970 and the Mine
Safety and Health Act of 1977. Present and proposed regulations govern worker
exposure to a number of substances and conditions present in work environments.
These include dust, mist, fumes, heat and noise. Compliance with these
regulations may require significant expenditures.
The global operations of Phelps Dodge, Asarco and Cyprus Amax are also
subject to extensive laws and regulations governing mining operations and
exploration, including laws and regulations pertaining to plant and mine safety
and health conditions. These laws and regulations may impose substantial costs
on our operations outside the United States.
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<PAGE> 18
PRODUCT AND PERSONAL INJURY LITIGATION
Asarco may also be subject to risks from product liability and personal
injury lawsuits. The following excerpt is from Asarco's quarterly report on Form
10-Q for the period ended June 30, 1999:
Asarco and two subsidiaries, as of June 30, 1999, are defendants in
1,169 lawsuits brought by 5,221 primary and 924 secondary plaintiffs
seeking substantial actual and punitive damages for personal injury or
death allegedly caused by exposure to asbestos. Three of these lawsuits are
purported class actions, two of which are allegedly brought on behalf of
persons who are not known to have asbestos-related injury. The third is
purportedly brought on behalf of persons suing both tobacco-related and
asbestos-related entities claiming damages for personal injury or death
arising from exposure to asbestos and cigarette smoke. In addition, Asarco
and certain subsidiaries are defendants in product liability lawsuits
involving various other products, including metals.
OPERATIONS OUTSIDE THE UNITED STATES ARE SUBJECT TO RISKS
We are a global company with substantial operations outside the United
States, including in Latin America, Asia and Europe. Both Asarco and Cyprus Amax
also have significant operations located in countries outside the United States,
including Chile, Peru and throughout Europe, Asia and Australia.
Mining and other investments outside the United States are subject to the
risks normally associated with conducting business in non-U.S. countries,
particularly those that are less developed or have emerging economies:
- uncertain political and economic environments;
- risks of war and civil disturbances;
- government restrictions on the movement of funds;
- government actions to deprive us of our contract rights or to take our
property without fair compensation;
- adverse changes in laws or policies of particular countries;
- increases in foreign taxation;
- delays in obtaining or the inability to obtain necessary governmental
permits;
- limitations on ownership and on repatriation of earnings; and
- foreign exchange controls and currency fluctuations.
Although we are not currently experiencing any significant problems in
non-U.S. countries arising from these risks, problems could arise in the future.
Investments made by Phelps Dodge, Asarco and Cyprus Amax outside the U.S. may
also be adversely affected by U.S. government laws and policies affecting
foreign trade, investment and taxation.
MINING IS SUBJECT TO RISKS
The business of mining is subject to a number of risks and hazards,
including:
- environmental hazards;
- labor disputes;
- encountering unusual or unexpected geologic formations or other
geological or grade problems;
- metallurgical and other processing problems;
- encountering unanticipated ground or water conditions;
- cave-ins, pit-wall failures and rock falls; and
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<PAGE> 19
- periodic interruptions due to inclement or hazardous weather conditions
or other unfavorable operating conditions.
In addition to the foregoing items, in the case of development projects,
the economic feasibility of any individual project is based upon, among other
things:
- the interpretation of geological data obtained from drill holes and other
sampling techniques;
- feasibility studies, which derive estimates of cash operating costs based
upon anticipated tonnage and grade of ore to be mined and processed;
- the configuration of the ore body;
- expected recovery rates of metals from the ore;
- comparable facility and equipment costs;
- environmental and regulatory requirements;
- anticipated climatic conditions; and
- estimates of labor productivity.
Such development projects also are subject to the successful completion of
final feasibility studies, issuance of necessary permits, and receipt of
adequate financing. Accordingly, uncertainties related to development projects
are more significant than those pertaining to existing operations.
The risks associated with mining described above could cause personal
injury or death, environmental damage, delays in mining, monetary losses and
possible legal liability. These risks could also cause mining projects to be
more expensive to develop or operate than expected, or to produce less than
expected, and could result in damage to mines or producing facilities.
RESERVE LEVELS ARE SUBJECT TO UNCERTAINTY
There are a number of uncertainties inherent in estimating quantities of
reserves, including many factors beyond the control of Phelps Dodge, Asarco and
Cyprus Amax. The reserve data incorporated by reference in this prospectus are
in large part only estimates. We cannot assure you that the volume and grade of
reserves recovered and rates of production will not be less than anticipated.
Declines in the market price of a particular metal also may render reserves
containing relatively lower grades of mineralization uneconomic to exploit. If
the price we realized for a particular commodity were to decline substantially
below the price at which ore reserves were calculated for a sustained period of
time, we potentially could experience reductions in reserves and asset
write-downs. Under certain such circumstances, we may discontinue the
development of a project or mining at one or more properties. Further, changes
in operating and capital costs and other factors, including but not limited to
short-term operating factors such as the need for sequential development of ore
bodies and the processing of new or different ore grades, may materially and
adversely affect reserves.
YEAR 2000 POSES POTENTIAL RISKS
We continue to review our "Year 2000" readiness. The Year 2000 issue stems
from the predominant use in computer applications of a two-digit field to
capture the year (e.g., "99" for 1999). Because the "19" is assumed in the date,
when computers turn their clocks to the year 2000, the two-digit field will read
"00" and some computer programs will assume the year is 1900. Programs that
calculate, compare or sort on a date field may cause erroneous results and
errors leading to the risk of business interruption or shutdown and other
potential problems. The Year 2000 issue is a global issue that is very complex
because of the many programs that may be impacted in any computer system. These
computer systems are used to support the activities of our businesses including
financial systems, process control technology and other computer-controlled
equipment.
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<PAGE> 20
The following is a list of representative types of risks that could result
in the event of one or more major failures of our information systems, mining
sites, or facilities to be Year 2000 ready, or similar major failures by one or
more of our major third party suppliers or customers:
- Information systems -- could include disruptions of business and
transaction processing such as customer billing, payroll, accounts
payable, purchasing, and other information processes until the systems
can be remedied or replaced;
- Mining facilities -- could include disruptions of mining processes and
facilities resulting in delays in delivery of products until
non-compliant components can be remedied;
- Major suppliers -- could include disruptions in the provision of supplies
and components and transportation that could cause subsequent
interruptions of mining activities and delays in product deliveries; and
- Major customers -- could include disruptions in sales, revenue, and cash
inflow as a particular customer may not be Year 2000 compliant or one of
their suppliers may experience failures that could impact the amount of
copper, molybdenum, or coal they require.
Failure to correct a material Year 2000 problem could materially and adversely
affect our results of operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Year 2000 issue, resulting in part from the
uncertainty of the readiness of suppliers and customers, we are unable to
determine with any certainty the consequences of Year 2000 failures and the
materiality of these potential failures. In addition, we cannot make any
assurances about the Year 2000 readiness of Asarco or Cyprus Amax.
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<PAGE> 21
THE PROPOSED COMBINATION
We are proposing a three-way business combination of Phelps Dodge, Asarco
and Cyprus Amax that we believe will create superior value for the shareholders
of all three companies.
We are offering to exchange all of the outstanding Cyprus Amax common
shares for Phelps Dodge common shares at an exchange ratio of 0.3135 Phelps
Dodge common shares for each Cyprus Amax common share. We are also separately
offering to exchange all of the outstanding Asarco common shares for Phelps
Dodge common shares at an exchange ratio of 0.4098 Phelps Dodge common shares
for each Asarco common share. We expect our proposed transaction to be tax-free
to you.
In July 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies. We believe our proposed three-way business combination
is much more valuable to shareholders of Asarco and Cyprus Amax than the
proposed two-party Asarco-Cyprus Amax merger, based on:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to you for the substantial cost savings we expect to
achieve;
- our plan to continue Phelps Dodge's current $2.00 per share dividend,
resulting in a substantial dividend increase for Asarco and Cyprus Amax
shareholders to 4.1 times the level contemplated in the proposed
Asarco-Cyprus Amax merger; and
- your opportunity to participate in the greater upside potential of the
combined entity through the ownership of Phelps Dodge common stock.
We have conducted an in-depth analysis of our proposed three-way
combination from a regulatory perspective and have concluded that we will be
able to obtain all necessary approvals on a timely basis.
We have made numerous requests to the management and Boards of Directors of
Asarco and Cyprus Amax to meet with us to discuss our proposal and why we
believe it is far superior to the proposed no-premium Asarco-Cyprus Amax merger.
However, despite our repeated requests, the management and Boards of Directors
of Asarco and Cyprus Amax have been unwilling to meet with us. For this reason,
we are making these offers directly to the shareholders of Asarco and Cyprus
Amax. See "Background of the Offer" beginning on page 16. We believe that the
ultimate decisions about the future of Cyprus Amax belong to you, the
shareholders.
We would prefer to combine all three companies. However, our offer to
Cyprus Amax shareholders is not conditioned on the success of our offer to
Asarco shareholders, nor is our offer to Asarco shareholders conditioned on the
success of our offer to Cyprus Amax shareholders. See "The Offer" beginning on
page 32.
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REASONS FOR THE PROPOSED COMBINATION
We believe the combination of Phelps Dodge, Asarco and Cyprus Amax
represents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to excel through
business cycles. We believe that the combination of Phelps Dodge, Asarco and
Cyprus Amax will produce the following valuable benefits:
- Ability to integrate operations. We expect the combined company to have
significantly greater ability to integrate southwest U.S. mining
operations, administrative functions in the U.S., Chile and Peru, and
worldwide exploration and development activities. Following the
combination, we would expect to operate all properties in accordance with
Phelps Dodge's disciplined management approach. This means that each
property would be run on a basis intended to earn in excess of the cost
of capital over the full copper price cycle.
- Accretion to cash flow. The combination would result in immediate and
substantial accretion to the cash flow of the combined company.
- Accretion to earnings. We expect the combination to result in
significant accretion to earnings per share of the combined company in
the second year, assuming copper prices of $0.80 -- $0.85 per pound.
- Superior production capability. The total annual worldwide copper
production of the combined company would be approximately 3.8 billion
pounds at current levels, with total attributable copper reserves of
approximately 80 billion recoverable pounds.
- Substantial cost savings. We expect the combined company to achieve
annual cash cost savings of at least $200 million by the end of the
second year after closing, as a result of reductions in overhead,
purchasing, exploration and other expenses. We also expect at least
another $65 million in annual savings from reduced depreciation expenses,
bringing the total annual savings to at least $265 million. These cost
savings are based on public information and our expectation that we can
deliver at least $75 million in incremental savings above the cash
synergy figure of $125 million projected in the proposed Asarco-Cyprus
Amax merger. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper
prices.
- Management strength. The combined company would have a strong and deep
management team, at both the operating and corporate levels, with strong
credibility in the marketplace. Phelps Dodge's management team would have
the opportunity to implement value-based portfolio management. We believe
that Phelps Dodge's management team has the credibility to make the tough
decisions necessary to integrate all three businesses rapidly and to
build sustainable long-term shareholder value.
- Portfolio of world-class copper mines. The combined company would have a
core portfolio of world-class copper mines, including Morenci, Southern
Peru Copper Corporation, El Abra, Cerro Verde and Candelaria. This core
portfolio would represent more than 50% of the combined company's current
annual production. At current levels, these properties would produce
approximately 2 billion pounds of copper annually, at an average cash
cost of less than $0.50 per pound.
- Operating leverage. The combined company would have tremendous operating
leverage, together with enough diversity in other businesses to mitigate
cyclical downturns.
- Increased competitiveness. The combined company would have increased
ability to compete for world-class projects.
- Reduced capital expenditures. By combining their businesses, Phelps
Dodge, Asarco and Cyprus Amax would be able to reduce maintenance and
growth capital expenditures significantly.
- Financial strength. The combined company would have a strong, liquid
balance sheet, with excellent access to capital. The company's financial
strength would give it the ability to create a world-class portfolio of
cost-competitive mining assets.
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<PAGE> 23
We believe these factors will provide superior value creation
opportunities, on an ongoing basis, for the shareholders of all three companies.
We believe that your ability to participate in this value creation, through your
ownership of Phelps Dodge common stock, is an important element of our proposal.
Over the past several years, Phelps Dodge's stock price has significantly
outperformed the stock prices of Asarco and Cyprus Amax. As a result of Phelps
Dodge's higher dividend, the level of outperformance is even greater when viewed
on the basis of the total return to shareholders assuming reinvestment of
dividends:
- Over the past 15 years, Phelps Dodge's total return has been 1,024% as
compared to 25% for Asarco and 102% for Cyprus Amax (Cyprus Amax's total
return is measured from Cyprus Amax's May 1985 initial public offering).
- Over the past 10 years, Phelps Dodge's total return has been 161% as
compared to negative 20% for Asarco and negative 26% for Cyprus Amax.
- Over the past five years, Phelps Dodge's total return has been 20% as
compared to negative 27% for Asarco and negative 40% for Cyprus Amax.
While we cannot make assurances about future returns, we believe that our
performance record indicates that we are best equipped to extract value out of
the Asarco and Cyprus Amax assets.
15
<PAGE> 24
BACKGROUND OF THE OFFER
In the autumn of 1996, Douglas C. Yearley, Chairman and CEO of Phelps
Dodge, had an informal conversation with Richard de J. Osborne, then Chairman,
Chief Executive Officer and President of Asarco, regarding a possible
combination of the two companies. Mr. Osborne declined to hold discussions on
this subject.
On July 15, 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies into a new company to be called "Asarco Cyprus
Incorporated." According to the press release issued by Asarco and Cyprus Amax,
Cyprus Amax shareholders would receive 0.765 shares of the combined company for
each of their Cyprus Amax shares, while Asarco shareholders would receive one
share of the combined company for each of their Asarco shares. The combined
company would have an initial dividend rate of $0.05 per share per quarter. The
transaction was approved by the Boards of Directors of Asarco and Cyprus Amax,
but remains subject to regulatory approvals and shareholder approvals.
On August 10, 1999, Douglas C. Yearley, Phelps Dodge's Chairman and Chief
Executive Officer, telephoned Milton H. Ward, Cyprus Amax's Chairman, Chief
Executive Officer and President, and Francis R. McAllister, Asarco's Chairman
and Chief Executive Officer, to propose a meeting to discuss the possibility of
a three-way combination involving Phelps Dodge, Asarco and Cyprus Amax. Shortly
thereafter, Messrs. Ward and McAllister sent the following letter to Mr.
Yearley:
August 10, 1999
Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue -- 16th Floor
Phoenix, AZ 85004-3014
Dear Doug:
We have discussed your request to meet with us jointly. We would like to
advise you that Cyprus Amax and Asarco are pursuing a combination under a Merger
Agreement dated July 15, 1999. Under the terms of that Agreement we are not at
liberty to have a discussion of the nature you were suggesting earlier today.
Best regards.
/s/ MILTON H. WARD
- ------------------------------------------
Milton H. Ward
Chairman, Chief Executive Officer
and President
Cyprus Amax Minerals Company
/s/ FRANCIS R. MCALLISTER
- ------------------------------------------
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
16
<PAGE> 25
On August 11, 1999, during the late afternoon, Mr. Yearley and J. Steven
Whisler, Phelps Dodge's President and Chief Operating Officer, sent the
following letter to Messrs. McAllister and Ward:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 11, 1999
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Dear Frank and Milt:
We are disappointed that you have declined to meet with us. As you know
from our telephone conversations, we have considered your pending business
combination and would like to discuss with you our proposal, described in more
detail below, to combine all three of our companies in a negotiated transaction.
We believe that a three-way combination of Phelps Dodge, Asarco and Cyprus
Amax would create superior shareholder value for the shareholders of Asarco and
Cyprus Amax. A three-way combination, by creating a lower-cost global
competitor, would also benefit the employees and customers of all three
companies. For these reasons, we are approaching you to discuss the concept of a
three-way combination.
We propose that all of the outstanding common stock of both Asarco and
Cyprus Amax be exchanged for Phelps Dodge common stock. The transaction would be
tax-free to your shareholders.
A combination of these businesses would result in cost savings well in
excess of the amounts you have indicated to be achievable through your pending
merger. Preliminarily we estimate that the annual cash cost savings should reach
at least $150 million.
We propose to reward your shareholders for these substantial incremental
benefits by offering your shareholders an exchange ratio of 0.3756 Phelps Dodge
common shares for each Asarco common share and 0.2874 Phelps Dodge common shares
for each Cyprus Amax common share. These exchange ratios preserve the relative
economics of your proposed combination and imply premiums of approximately 25%
based on current market prices for Asarco and Cyprus Amax.
We believe this proposal creates superior value for your shareholders based
on:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;
- their opportunity to participate in the ongoing value creation of the
combined company; and
- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in substantial dividend increases for
both Asarco and Cyprus Amax shareholders to 3.76 times the level
contemplated in your pending merger.
Our preference is for a combination of all three companies, which would of
course involve the consent of both Asarco and Cyprus Amax to a modification of
your existing agreement.
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<PAGE> 26
Since your merger agreement has not been publicly filed, we have not had
the opportunity to review its terms. Based on your August 10, 1999 letter, it is
unclear to us whether discussions may proceed once you receive a written
proposal such as this letter. In any event, if necessary under your merger
agreement, we request that you grant one another waivers to allow meetings with
us on our proposal which, as discussed below, would be far more favorable to
your shareholders than your proposed merger.
We are confident that the market reaction to a three-way combination would
be positive. In particular we believe the market would recognize:
- the significantly stronger ability of the combined company, relative to
the Asarco-Cyprus Amax combination, to integrate southwest U.S. mining
operations, administrative functions in Chile and Peru and world-wide
exploration and development activities;
- the financial strength of the combined company and ability to create a
world class portfolio of cost competitive mining assets;
- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;
- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;
- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;
- the ability of the combined company to reduce capital expenditures;
- a strong, liquid balance sheet, with excellent access to capital; and
- how all of these factors would build greater shareholder value, on an
ongoing basis, for the shareholders of all three companies.
This is intended to be a confidential proposal which is subject to the
execution of a definitive merger agreement and receipt of customary approvals,
including approval by our respective Boards of Directors and shareholders. We
have conducted in-depth analyses of the proposed three-way combination from a
regulatory perspective and have concluded that it will be possible to obtain the
necessary approvals on a timely basis.
We believe that our proposal is substantially more attractive to your
shareholders than your pending merger. In addition to the sizeable premium we
are offering, your shareholders would participate, through their ongoing Phelps
Dodge common stock ownership, in a larger enterprise with greater realizable
cost savings and synergies, a stronger portfolio of cost competitive assets and
a deep management team with a strong operating record. We have no doubt that
your shareholders will enthusiastically embrace our proposal once they learn of
it.
We have discussed this proposal with our Board, which fully supports it. We
are confident of our ability, with your cooperation, to complete this
transaction as quickly as your proposed two-party Asarco-Cyprus Amax merger.
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<PAGE> 27
We are firmly committed to moving forward quickly to consummate this
transaction. As we mentioned, we would be happy to meet with you in New York or
another mutually convenient location to amplify our proposal. In any event, we
would appreciate a response by 5:00 p.m., New York time, on Wednesday, August
18, 1999.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and
Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
On the morning of August 12, 1999, Messrs. McAllister and Ward telephoned
Mr. Yearley and once again refused to meet to discuss Phelps Dodge's proposal.
That afternoon, Phelps Dodge sent the following letter to the Board of Directors
of Cyprus Amax (and sent a substantially similar letter to the Board of
Directors of Asarco):
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 12, 1999
Board of Directors of Cyprus Amax Minerals Company
c/o Mr. Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Ladies and Gentlemen:
We would like to engage in discussions on our proposal to combine Cyprus
Amax, Asarco and Phelps Dodge in a negotiated transaction. Our proposal,
described in more detail in the attached correspondence, is far better for the
shareholders of your company than your pending merger with Asarco because of:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;
- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in a substantial dividend increase for
Cyprus Amax shareholders to more than three times the level contemplated
in your pending merger; and
- their opportunity to participate in the ongoing value creation of the
combined company through the ownership of Phelps Dodge common stock.
In our attached letter of August 11, we proposed specific exchange ratios
of Phelps Dodge shares for Asarco and Cyprus Amax shares. Based on the August 11
closing price of Phelps Dodge, Cyprus Amax and Asarco shares, these ratios
implied premiums of approximately 25% for each of Cyprus Amax and Asarco and
preserved the relative economics of your proposed combination with Asarco. We
would reiterate our intention on the basis of the current levels of Phelps
Dodge, Cyprus Amax and Asarco share prices to pay premiums of approximately 25%
for Cyprus Amax and Asarco.
We believe that consideration in the form of Phelps Dodge common stock
should be particularly attractive to your shareholders. Over the past several
years Phelps Dodge's stock price has significantly
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<PAGE> 28
outperformed the stock prices of Cyprus Amax and Asarco. As a result of Phelps
Dodge's higher dividend, the level of outperformance is even greater when viewed
on the basis of the total return to shareholders assuming reinvestment of
dividends. Over the past 10 years Phelps Dodge's total return has been 161% as
compared to -26% and -20% for Cyprus Amax and Asarco, respectively. Similarly,
over the past five years, Phelps Dodge's total return has been 20% as compared
to -40% for Cyprus Amax and -27% for Asarco. We are very proud of this strong
management and operational track record over a difficult copper environment.
Thus far, however, your management has refused to listen to, or consider,
our proposal.
On Tuesday afternoon, August 10, 1999, following a meeting of our board of
directors, we spoke by telephone with Messrs. Ward and McAllister to request a
meeting to discuss our proposal. Just a few hours later, we received from them
the attached letter, dated August 10, 1999, advising that under the terms of a
non-public July 15, 1999 Merger Agreement they were "not at liberty" to have
such a discussion.
Since Messrs. Ward and McAllister refused to meet with us, late yesterday
we sent them the enclosed August 11 letter laying out the basic terms of our
proposal and again requesting a meeting.
This morning we received a telephone call from Messrs. Ward and McAllister
again refusing to discuss our proposal.
Although it would have been our preference to communicate through your CEO,
his adamant refusal to meet with us, or even to give our written proposal any
serious consideration, has required that we communicate with you directly. Since
you and Asarco are the only parties to your merger agreement, and may amend it
or waive its provisions at any time, for management of the two companies to
state that their own agreement prevents such discussions seems a particularly
weak basis for their refusal even to meet with us.
We are making a similar proposal to Asarco. Our willingness to enter into
discussions with each of you is not conditioned on the participation of the
other (assuming this is consistent with any applicable, binding contracts).
We are resolute in our determination to complete this transaction with both
companies. We are confident that your shareholders will recognize the superior
benefits of our proposal, and will accept nothing less.
We still strongly prefer to consummate this transaction on a mutually
satisfactory, negotiated basis. Accordingly, we do not plan to disclose our
proposal publicly at this time. Because of the importance of this matter to your
shareholders, we request that you make a commitment, by 5:00 p.m. Friday, August
20, 1999, to meet with us promptly to commence serious negotiations.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and
Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
On August 20, 1999, Asarco and Cyprus Amax filed a joint proxy
statement/prospectus in connection with their proposed merger, and for the first
time disclosed the terms of their merger agreement. In addition, Asarco and
Cyprus Amax issued a press release announcing that they had set August 25, 1999
as the record date for determining shareholders entitled to vote at the
shareholder meetings, scheduled for September 30, 1999, to consider approval of
their proposed merger. Asarco and Cyprus Amax also disclosed Phelps Dodge's
proposal for a three-way business combination and announced that they were
rejecting it. Asarco and Cyprus Amax also revised upward their estimates of
synergies resulting from their proposed two-party merger. The text of the press
release was as follows:
DENVER, CO. and NEW YORK, N.Y., August 20, 1999 -- Cyprus Amax Minerals
(NYSE:CYM) and ASARCO Incorporated (NYSE:AR) announced that they have set
shareholder
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<PAGE> 29
meetings for September 30, 1999 to approve their previously announced merger of
equals. Asarco Cyprus Incorporated will be the largest publicly traded copper
company with an estimated cash cost of under 50 cents. Definitive proxy
materials will be mailed to shareholders of record on August 25, 1999.
Cyprus and Asarco also announced that joint Asarco and Cyprus merger teams
are reviewing all operating and administrative aspects of the new organization
to identify organizational and other profit driven changes in the way they do
business. The companies have engaged outside consultants to assist in
identification of cost savings to facilitate the process. As a result of these
reviews, the estimate of annual expense reductions is now approaching $200
million including $50 million in reduced administrative and overhead costs, $50
million from lower costs of purchased materials and services, $25 million in
other costs and $75 million in lower depreciation. As part of the cost
reductions, Cyprus' Denver office will be closed and Asarco's New York office
will be downsized and relocated to New Jersey. In addition, the companies
believe the merger will provide the flexibility to rationalize higher cost
production during periods of low copper prices, which could be expected to
result in operational cash improvements approaching $75 million annually.
Cyprus and Asarco also jointly reported that the Boards of both companies
had received an unsolicited proposal from Phelps Dodge Corporation to negotiate
an agreement for Phelps Dodge to acquire both companies for stock. Phelps Dodge
proposed an exchange of .3756 of a Phelps Dodge share for each Asarco share and
.2874 of a Phelps Dodge share for each Cyprus share. Phelps Dodge's proposal is
subject to a number of contingencies.
On August 19, 1999, the Asarco Board of Directors and the Cyprus Amax Board
of Directors, together with their respective legal and financial advisors, met
separately to consider the unsolicited proposal from Phelps Dodge. Both the
Asarco Board of Directors and the Cyprus Amax Board of Directors determined that
pursuing the Asarco Cyprus merger was in best interests of Asarco and Cyprus
Amax stockholders, respectively, and reconfirmed their respective
recommendations of the merger.
Since the merger announcement, both Boards noted that the share prices of
Cyprus and Asarco have outperformed the other U.S. listed copper companies.
Asarco Cyprus expects that at its estimated cash costs of under 50 cents per
pound, it will require a copper price of less than 65 cents per pound to
breakeven on a net earnings basis. Asarco Cyprus will have a strong, experienced
management team and the financial capacity to further enhance operating
efficiencies, expand or develop low cost copper properties and otherwise
rationalize operations to achieve optimum operating levels.
Also on August 20, 1999, Asarco and Cyprus Amax sent the following letter
to Phelps Dodge:
August 20, 1999
Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050
Dear Doug:
We have tried to reach you this morning to convey the response of our
respective Boards and to share with you the attached press release.
Each of our companies has convened its Boards and received thorough
presentations from financial and legal advisors. After full consideration of
your proposal, each Board unanimously decided that it was in the best interests
of its shareholders to pursue the Asarco Cyprus merger. That is what we intend
to do.
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<PAGE> 30
Sincerely,
/s/ FRANCIS R. MCALLISTER
- ------------------------------------------
Francis R. McAllister
Chairman and Chief
Executive Officer
Asarco Incorporated
/s/ MILTON H. WARD
- ------------------------------------------
Milton H. Ward
Chairman, Chief Executive
Officer and President
Cyprus Amax Minerals Company
During the afternoon of August 20, 1999, Phelps Dodge made the following
announcement by press release:
PHELPS DODGE PROPOSES TO ACQUIRE ASARCO AND CYPRUS AMAX IN
STOCK TRANSACTIONS AT APPROXIMATE 30% PREMIUMS
UNIQUE OPPORTUNITY TO CREATE PORTFOLIO OF LOWER-COST GLOBAL COPPER ASSETS
PHOENIX, AZ, August 20, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it is proposing to acquire both Asarco Incorporated (NYSE:
AR) and Cyprus Amax Minerals Company (NYSE: CYM) in stock-for-stock mergers that
would provide approximate 30% premiums to the shareholders of both companies.
Neither proposal is conditioned upon acceptance of the other.
On July 15, 1999, Asarco and Cyprus Amax announced a no-premium merger
subject to shareholder approval. Phelps Dodge has since made numerous
unsuccessful attempts to negotiate business combinations with both companies on
terms that are greatly superior for Asarco and Cyprus Amax shareholders.
Phelps Dodge would acquire Asarco in a tax-free merger in which each share
of Asarco common stock would be converted into 0.4098 Phelps Dodge common
shares. Based on the share prices of Phelps Dodge and Asarco before the stocks
were halted this morning, the proposal values Asarco at $24.05 per share, or a
total equity value of approximately $960 million, representing an approximate
30% premium for Asarco shareholders.
Phelps Dodge would acquire Cyprus Amax in a tax-free merger in which each
share of Cyprus Amax common stock would be converted into 0.3135 Phelps Dodge
common shares. Based on share prices of Phelps Dodge and Cyprus Amax before the
stocks were halted this morning, the proposal values Cyprus Amax at $18.40 per
share, or a total of equity value of approximately $1.7 billion, representing an
approximate 29% premium for Cyprus Amax shareholders.
The Phelps Dodge proposals represent a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with enhanced
flexibility to excel through business cycles. This three-way combination would
also provide significantly greater opportunities to integrate operations in the
southwestern United States, administrative functions in the United States, Chile
and Peru, and worldwide exploration and development activities than the proposed
Asarco/Cyprus Amax merger. Consistent with demonstrated Phelps Dodge standards,
all Asarco and Cyprus Amax properties would be operated to earn more than the
cost of capital over the copper cycle. At current levels, annual worldwide
copper production of the combined companies would be approximately 3.8 billion
pounds, with attributable copper reserves of approximately 80 billion pounds,
predominantly in the U.S., Chile and Peru.
Phelps Dodge expects the three-way combination to be immediately and
substantially accretive to its cash flow, with significant opportunities to
improve return on capital at the combined entity. The transactions would be
significantly accretive to Phelps Dodge's earnings per share beginning in the
second year after closing, based on the current portfolio of the combined
companies and analysts' estimates of copper prices of $0.80 to $0.85 per pound
in 2001.
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<PAGE> 31
Phelps Dodge expects to achieve annual cash cost savings of at least $200
million, to be fully phased in by the end of the second year after closing,
through reductions in SG&A expenses, operating improvements and efficiencies in
exploration. Additional non-cash savings of approximately $65 million per year
are expected to result from lower depreciation charges. These cost savings are
based on public information and the Company's expectation that it can deliver at
least $75 million in incremental savings above the new cash synergy figure of
$125 million now projected in the proposed Asarco/Cyprus Amax combination. This
does not include any cost savings for the rationalization of high-cost
production during periods of low copper prices. The transactions would use
purchase accounting.
Phelps Dodge intends to continue its current annual cash dividend of $2.00
per share. This would provide a substantial dividend increase to shareholders of
both Asarco and Cyprus Amax -- equal to 4.1 times the dividend they would
receive in the proposed Asarco/Cyprus Amax merger.
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge,
said, "We are very disappointed that Asarco and Cyprus Amax have declined our
repeated attempts to enter into negotiated agreements. Our proposed three-way
combination provides superior value to shareholders of Asarco and Cyprus Amax,
including substantial premiums, the opportunity to participate in the tremendous
upside potential of the combined entity, and a cash dividend that is more than
quadruple what they would receive in the proposed Asarco/Cyprus Amax
transaction."
Yearley continued, "This compelling combination would create a more
cost-effective global copper producer with the operating expertise, broad
resource base and financial strength to deliver enhanced value to shareholders
of all three companies. The improved efficiencies of the combined companies
would also benefit other stakeholders, including our customers, employees and
communities. In the global copper market, efficient and low-cost operations are
critical, and this transaction would enhance our ability to compete and give us
greater ability to satisfy our customers' needs. Customers would continue to
enjoy Phelps Dodge's high standard of on-time delivery and quality products and
benefit from our combined lower cost structure; employees would become part of a
stronger organization with enhanced ability to compete for large-scale projects;
and communities would benefit from our corporate citizenship and philanthropy
and continued commitment to responsible environmental practices."
J. Steven Whisler, President and Chief Operating Officer of Phelps Dodge,
said, "We are committed to optimizing the combined operations of the three
companies and delivering superior returns on capital throughout the entire
copper cycle. Phelps Dodge has generated much better shareholder returns than
Asarco and Cyprus Amax through copper cycles -- greatly outperforming both
companies over the past three, five, 10 and 15-year periods. For example, during
the past 10 years on a total return basis with dividends reinvested Phelps Dodge
has produced a positive shareholder return of 161% versus negative 20% for
Asarco and negative 26% for Cyprus Amax. Over the 15-year period, Phelps Dodge
has produced a positive shareholder return of 1024% versus 25% for Asarco and
102% for Cyprus Amax. Phelps Dodge's strong and deep management and operating
teams have a proven track record of active, value-based portfolio management and
of taking decisive actions required to build sustainable long-term shareholder
value. We intend to take advantage of the substantial opportunities to integrate
the combined companies' mining assets and will ensure that every property in the
portfolio provides an appropriate return on invested capital."
Yearley concluded, "This innovative three-way combination fits well with
our strategy of sustaining a strong and liquid balance sheet, achieving earnings
and cash flow accretion and improving our resource base, while maintaining a
cost-competitive profile. While we continue to prefer negotiated transactions,
this three-way combination is so compelling, both strategically and financially,
that we are determined to take all necessary steps to complete it expeditiously.
We are confident we will obtain the necessary regulatory approvals to complete
the transactions and believe shareholders of Asarco and Cyprus Amax will
strongly support this unique opportunity to create value in the global copper
market in which we compete."
Phelps Dodge's financial advisor is Morgan Stanley Dean Witter and its
legal advisors are Debevoise & Plimpton and Shearman & Sterling.
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<PAGE> 32
Phelps Dodge Corporation is among the world's largest producers of copper.
The company also is one of the world's largest producers of carbon black, one of
the world's largest manufacturers of magnet wire, and has operations and
investments in mines and wire and cable manufacturing facilities around the
world. Phelps Dodge has operations in 28 countries.
Statements in this press release include "forward-looking statements" that
express expectations of future events or results. All statements based on future
expectations rather than on historical facts are forward-looking statements that
involve a number of risks and uncertainties, and the company cannot give
assurance that such statements will prove to be correct. Please refer to the
Management's Discussion and Analysis sections of the company's report on Form
10-K for the year ended December 31, 1998.
Later that day, Phelps Dodge sent the following letter to the Board of
Directors of Cyprus Amax (and sent a substantially similar letter to the Board
of Directors of Asarco):
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 20, 1999
Board of Directors of Cyprus Amax Minerals Company
c/o Mr. Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Ladies and Gentlemen:
We are disappointed in your response to our proposed three-way combination
of Cyprus Amax, Asarco and Phelps Dodge. As you know, we have on three recent
occasions requested the opportunity to discuss our proposal, which we believe
would be far superior to your shareholders than your proposed combination with
Asarco.
We are particularly disappointed that instead of accepting our previous
requests to meet to discuss our proposal to acquire Cyprus Amax for a
substantial premium, you chose today to announce unilaterally our interest in
acquiring Cyprus Amax and Asarco and to reject our proposal in favor of your
no-premium merger proposal with Asarco. This appears consistent with the manner
in which you have chosen to treat your own shareholders by announcing just
today, at the same time you first disclosed the terms of your July 15 merger
agreement, that the record date for your shareholder vote on the no-premium
merger with Asarco would be August 25. Since trades after today will settle
after August 25, this effectively precluded any significant trading in the
market on an informed basis before the determination of shareholders eligible to
vote at your meeting.
In light of your unilateral announcement, we have no other choice than to
publicly announce our proposal to enter into a business combination with Cyprus
Amax and Asarco, so that share owners of all three companies are fully informed.
Terms of our Proposal
We propose a business combination of Phelps Dodge and Cyprus Amax pursuant
to which all of the outstanding common stock of Cyprus Amax would be exchanged
for Phelps Dodge common stock at an exchange ratio of 0.3135 Phelps Dodge common
shares for each Cyprus Amax common share. We are also independently proposing to
Asarco a business combination of Phelps Dodge and Asarco pursuant to which all
of the outstanding common stock of Asarco would be exchanged for Phelps Dodge
common stock at an exchange ratio of 0.4098 Phelps Dodge common shares for each
Asarco common share. Based on share prices for the three companies' common
shares before trading was halted this morning,
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<PAGE> 33
these ratios imply a premium of approximately 29% for Cyprus Amax and a premium
of approximately 30% for Asarco, while preserving the relative economics of the
exchange ratio under your proposed combination with Asarco.
Following the combination, we plan to continue the current $2.00 per share
Phelps Dodge common dividend. This would result in a substantial dividend
increase for Cyprus Amax shareholders to 4.1 times the dividend contemplated in
your proposed merger with Asarco.
Our proposed transaction would be tax-free for your shareholders. In
addition, through their ownership of Phelps Dodge common stock, your
shareholders would continue to participate in the ongoing value creation of the
combined company. Although we prefer a transaction involving all three
companies, we are prepared to enter into a negotiated business combination with
either Cyprus Amax or Asarco, regardless of whether the other company is willing
to proceed on a negotiated basis.
We believe that consideration in the form of Phelps Dodge common stock
should be particularly attractive to your shareholders. Over the past several
years Phelps Dodge's stock price has significantly outperformed the stock prices
of Cyprus Amax and Asarco. As a result of Phelps Dodge's higher dividend, the
level of outperformance is even greater when viewed on the basis of the total
return to shareholders assuming reinvestment of dividends. Over the past 10
years Phelps Dodge's total return has been 161% as compared to negative 26% and
negative 20% for Cyprus Amax and Asarco, respectively. Similarly, over the past
15 years, Phelps Dodge's total return has been 1024% as compared to 102% for
Cyprus Amax and 25% for Asarco. We are very proud of this strong management and
operational track record over a difficult copper environment.
The Combined Company
We believe that our proposal presents a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with enhanced
flexibility to deliver superior results in all business cycles. Our proposal
would create a much stronger company than would your proposed merger with Asarco
through:
- the significantly stronger ability of the combined company, relative to
the Cyprus Amax-Asarco combination, to integrate southwestern U.S.
mining operations, administrative functions in the U.S., Chile and Peru,
and worldwide exploration and development activities;
- the financial strength of the combined company and ability to create a
world class portfolio of cost-competitive mining assets;
- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;
- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;
- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;
- the immediate and substantial accretion to the cash flow of the combined
company resulting from the transaction;
- the significant accretion to earnings per share of the combined company
beginning in the second year after closing, based on the current
portfolio of the combined companies and analysts' estimates of copper
prices of $0.80 to $0.85 per pound in 2001;
- the total current annual copper production of the combined company of
3.8 billion pounds and the total attributable copper reserves of 80
billion pounds;
- the increased ability of the combined company to compete for world-class
projects;
- the ability of the combined company to reduce capital expenditures;
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<PAGE> 34
- the strong, liquid balance sheet of the combined company, with excellent
access to capital; and
- the way all of these factors would build greater shareholder value, on
an ongoing basis, for the shareholders of all three companies.
Through the measures described above we estimate that in a three-way
combination we could achieve approximately $200 million in annual cash cost
savings, fully phased in by the end of the second year after closing of the
transaction. In addition, we expect lower depreciation of approximately $65
million annually, bringing total estimated annual savings to approximately $265
million. These cost savings are based on public information and our expectation
that we can deliver at least $75 million in incremental savings above the new
cash synergy figure of $125 million that you have projected in the proposed
Cyprus Amax-Asarco combination. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper prices.
Following the combination, we would expect to operate all properties in
accordance with Phelps Dodge's disciplined management approach. This means that
each property would be run on a basis intended to earn in excess of the cost of
capital over a full copper price cycle. We believe that Phelps Dodge's
management team has the credibility to make the tough decisions necessary to
rapidly integrate all three businesses and to create value for shareholders.
A three-way combination, by creating a more efficient global competitor,
would also benefit the employees and customers of all three companies. We have
conducted an in-depth analysis of the three-way combination from a regulatory
perspective and have concluded that it will be possible to obtain the necessary
approvals on a timely basis.
Our Board of Directors has authorized this proposal and we are resolutely
committed to its consummation. We are confident that your shareholders will find
our proposal to be a unique and compelling opportunity. We continue to prefer to
proceed on a mutually satisfactory, negotiated basis but are prepared to pursue
all other avenues should that be necessary. We are ready to meet with you or
your management at any time.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
On August 25, 1999, Asarco and Cyprus Amax sent the following letter to
Phelps Dodge:
August 25, 1999
Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050
Dear Doug:
We and our respective boards have considered your revised proposal to
acquire our companies. We have the following issues with your proposal:
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<PAGE> 35
1. The exchange ratios proposed in your August 20 press release do not
allocate to Cyprus Amax and Asarco holders a fair share of the value
created by uniting their two companies. We are prepared to negotiate a
transaction with Phelps Dodge that would provide our holders with .4055
shares of Phelps Dodge common stock for each Cyprus Amax share, and
.5300 Phelps Dodge shares for each Asarco share.
2. In order for us to proceed with Phelps Dodge, you must make clear that
Phelps Dodge will undertake all actions necessary to secure regulatory
approval for your proposed transaction including any divestiture or
similar action required, and will provide credible assurances that such
regulatory approval will be forthcoming. The statements in your letters
concerning antitrust issues are not sufficient on this point.
3. You have not proposed a form of contract for your transaction. We would
be prepared to proceed on the basis of representations, warranties and
covenants made by Cyprus Amax and Asarco to each other in their merger
agreement, with similar representations, warranties and covenants made
by Phelps Dodge.
4. Your letter did not indicate whether your proposal was subject to due
diligence. A due diligence requirement introduces substantial
uncertainty as to your proposal. We would expect, as part of our effort
to close our pending merger or any potential transaction with you as
quickly as possible, that you would not require any further due
diligence with respect to either Cyrus Amax or Asarco.
We strongly believe that the combination of Cyprus Amax and Asarco, without
the effect of combining further with Phelps Dodge, provides greater value to
Cyprus Amax and Asarco holders than your August 20 proposal, poses fewer
regulatory issues and can be completed more quickly. Accordingly, we will be
proceeding to present that transaction to our stockholders and to closing on
September 30, 1999. We are prepared, however, to negotiate a transaction that
involves all three companies that satisfies all the foregoing requirements. For
your information, we are attaching to this letter a copy of the press release
Asarco and Cyprus Amax issued today concerning our response to Phelps Dodge. We
also want to advise you that apart from this communication, neither party has
waived any of its legal or other rights, or rights or obligations under our
merger agreement.
Sincerely,
<TABLE>
<S> <C>
/s/ FRANCIS R. MCALLISTER /s/ MILTON H. WARD
- ----------------------------------------- ---------------------------------------------------
Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
ASARCO Incorporated Cyprus Amax Minerals Company
</TABLE>
The text of the attached press release was as follows:
DENVER, CO AND NEW YORK, NY, AUGUST 25, 1999 -- Cyprus Amax Minerals
Company (NYSE: CYM) and ASARCO Incorporated (NYSE: AR) today jointly announced
that they have improved the terms of their own combination transaction. In
addition they have written to Phelps Dodge outlining their willingness to
negotiate with Phelps Dodge on terms included in the letter. According to the
letter, Asarco and Cyprus Amax would be willing to proceed with a three-way
combination with Phelps Dodge if its proposed exchange ratios are increased, if
Phelps Dodge fully underwrites the risk of antitrust problems with its proposal
and if the contract terms mirror those of the Asarco/Cyprus contract. Asarco and
Cyprus Amax said the exchange ratios they would require were .5300 of a Phelps
Dodge share for Asarco holders and .4055 of a Phelps Dodge share for Cyprus Amax
holders. The letter to Phelps Dodge is attached.
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<PAGE> 36
The two companies also said they have decided to improve the financial
terms of their own combination by including a special payment of $5.00 per share
to the stockholders of the combined Asarco Cyprus Incorporated. The special
payment would be paid to stockholders as soon as possible after consummation of
the merger. Asarco and Cyprus Amax emphasized that they were proceeding with
their two-way combination which, subject to stockholder approval, will close on
September 30, 1999.
Speaking together, Milton H. Ward, Chairman and Chief Executive Officer of
Cyprus Amax and Francis R. McAllister, Chairman and Chief Executive Officer of
Asarco said "Our response to Phelps Dodge evidences our intent to secure the
best value for our shareholders whether through a three way combination
including Phelps Dodge or through consummation of the merger previously
announced. We have presented very simple terms to Phelps Dodge which we believe
recognize the contributions our two companies make to a three way combination.
The proposal previously communicated by Phelps Dodge fails to reward our
stockholders for the values derived from the Asarco Cyprus transaction. Our
proposed exchange ratio gives recognition to the fact that our shareholders
would be contributing approximately 50% of the value of a three way combination.
"We intend to move forward to complete our own merger transaction as soon
as possible and as a sign of confidence of our ability to achieve cost
reductions of at least $200 million annually, Asarco Cyprus will make a special
payment to shareholders when the merger closes. This special $5.00 per share
payment reflects the Boards' and managements' confidence in their ability to
deliver benefits from the merger. Asarco Cyprus is expected to have in excess of
$1 billion in cash at the time of closing and the Boards of both companies have
agreed that Asarco Cyprus will pursue the sale of Cyprus Amax's investments in
Kinross Gold and its Australian coal holdings and Asarco's specialty chemicals
business. We would expect the sales to be completed within six months after
closing. Proceeds are expected to approach $1 billion and cash taxes would be
minimized due to tax benefits from the sale of the Kinross shares. Proceeds
would be used to pay down debt and improve the liquidity of the company."
Messrs. Ward and McAllister stated that they and their respective Boards
are committed to maximizing shareholder value and will continue to do so after
the merger is completed. In order to ensure that Phelps Dodge or any interested
buyer is able to present a bona fide proposal to acquire 100% of the stock of
the Company, during the first 90 days following completion of the merger,
stockholders will have the right to call a meeting to redeem the rights plan. In
addition, change in control provisions in any employment contracts entered into
by the Company will be waived for that same 90 day period.
In response, Phelps Dodge issued the following press release:
PHELPS DODGE CONFIRMS RECEIPT OF LETTER FROM ASARCO AND CYPRUS AMAX
PHOENIX, Aug. 25 -- Phelps Dodge Corporation (NYSE: PD) confirmed that it
has received a letter from Asarco Incorporated (NYSE: AR) and Cyprus Amax
Minerals Company (NYSE: CYM) and issued the following response:
"The proposal put forth by Asarco and Cyprus Amax does not change Phelps
Dodge's commitment to complete a three-way combination that is beneficial to
shareholders of all three companies. While Phelps Dodge will review the most
recent proposal from Asarco and Cyprus Amax, we believe that the Phelps Dodge
proposal, which already provides Asarco and Cyprus Amax shareholders a 30%
premium, a $2.00 annual dividend and very substantial participation in the
greater upside potential of the three-way combination, is fully priced based on
public information and Phelps Dodge's best estimates of the real, achievable
cost synergies in a three-way combination. Phelps Dodge indicated that the
economic aspects of Asarco and Cyprus Amax's proposed three-way merger terms are
totally unreasonable and would deliver nearly all of the economic value of the
three-way combination to Asarco and Cyprus shareholders."
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<PAGE> 37
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge,
added, "If Asarco and Cyprus Amax are truly interested in a negotiated
transaction and not just posturing, we would be more than willing to begin real
discussions. Neither company has attempted to sit down with us."
Phelps Dodge indicated that it intends to complete its review in the near
term and to make a more definitive and comprehensive response thereafter.
On August 27, 1999, Phelps Dodge issued the following press release:
PHELPS DODGE FILES REGISTRATION STATEMENTS FOR
EXCHANGE OFFERS FOR ASARCO AND CYPRUS AMAX
------------------------------------
FILES PRELIMINARY PROXY STATEMENTS TO OPPOSE ASARCO/CYPRUS AMAX MERGER;
COMMENCES LITIGATION AGAINST BOTH COMPANIES
PHELPS DODGE WILL WITHDRAW OFFER AND NOT BID FURTHER IF ASARCO AND CYPRUS AMAX
SHAREHOLDERS APPROVE TWO-WAY MERGER AT SEPTEMBER 30 VOTE
PHOENIX, AZ, AUGUST 27, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it has filed registration materials with the Securities and
Exchange Commission for exchange offers for all outstanding Asarco Incorporated
(NYSE: AR) and Cyprus Amax Minerals Company (NYSE: CYM) common shares. Phelps
Dodge will commence the exchange offers as soon as the registration statements
are declared effective.
In addition, the Company filed preliminary proxy materials with the
Securities and Exchange Commission to solicit proxies from Asarco and Cyprus
Amax stockholders to vote against the proposed merger of Asarco and Cyprus Amax.
Asarco and Cyprus Amax have set shareholder meetings for September 30, 1999 to
vote on their proposed merger.
Separately, Phelps Dodge announced that it has commenced litigation in New
Jersey and Delaware against Asarco and Cyprus Amax, respectively, and their
directors, for breaching their fiduciary duties by impermissibly prohibiting
directors from informing themselves of any third-party merger or acquisition
proposal and providing excessive break-up fees.
"While we continue to prefer negotiated transactions, we are committed to
this compelling three-way combination, and are taking all necessary steps to
complete it," said Douglas C. Yearley, Chairman and Chief Executive Officer of
Phelps Dodge. "If Asarco and Cyprus Amax are truly interested in a negotiated
transaction we are ready to begin discussions immediately. We continue to
believe our offer is fully priced and compelling. We are confident that
shareholders of Asarco and Cyprus Amax will recognize that our proposals are
clearly superior to the Asarco/Cyprus Amax no-premium two-way merger. We view
the September 30 vote as a referendum. If Asarco and Cyprus Amax shareholders do
approve their two-way combination, we will withdraw our substantial premium
proposal and will not bid further."
Phelps Dodge also today sent the following letter to the Chairmen of Asarco
and Cyprus Amax:
August 27, 1999
<TABLE>
<S> <C>
Francis R. McAllister Milton H. Ward
Chairman and Chief Executive Officer Chairman, Chief Executive and President
ASARCO Incorporated Cyprus Amax Minerals Company
180 Maiden Lane 9100 East Mineral Circle
New York, NY 10038 Englewood, CO 80112
</TABLE>
29
<PAGE> 38
Dear Frank and Milt:
We continue to believe that our proposed three-way combination is clearly
superior for your shareholders than your proposed no-premium, two-party
transaction. Our fully priced proposal provides a substantial premium, our $2.00
annual dividend and opportunity for participation in greater upside potential.
In your August 25 letter to us you identified four issues with our
proposal. We are prepared to accept three of your points. On the fourth point,
your demand on exchange ratios, we hope that you will reconsider your
unreasonable position and sit down at the table with us to complete our proposed
three-way combination.
Should you proceed to complete your two-way merger, you will proceed alone
because we will withdraw our substantial premium proposal and will not bid
further. Your September 30 vote will be a referendum on our proposal.
Your proposal on exchange ratios is so unreasonable that its sincerity is
questionable. It seems to be premised on the flawed assumption that since your
combined production would be comparable to Phelps Dodge's, you should be valued
at the same level as Phelps Dodge. Of course, this is clearly not what investors
believe since it is not reflected in the relative market valuations of the three
companies. The simplistic assumption you seem to be making fails to reflect
Phelps Dodge's long track record of making tough management decisions and
delivering significantly greater value to shareholders than either ASARCO or
Cyprus Amax. Over a fifteen year period we have delivered total returns to
shareholders of 1,024% in contrast to 25% for ASARCO and 102% for Cyprus Amax.
Moreover, based on the information in your August 20 Form S-4 registration
statement, it appears that the conclusions arrived at by your own investment
bankers do not support your exchange ratio demand. The exchange ratios you have
demanded would deliver nearly all of the incremental value to be derived from a
three-way combination to your shareholders and very little to our shareholders.
This is, as you no doubt anticipated, completely unacceptable to us.
In addition, we don't believe that your shareholders will be fooled by the
flawed measures you announced which purport to accommodate the possibility of a
third party transaction during the 90 days following completion of your merger.
None of your public statements address in any meaningful way all of the many
steps that would be necessary to give your shareholders a realistic opportunity
to benefit from an attractive third party proposal. Among the additional matters
that would have to be addressed if you were serious about accommodating third
party transactions would be to eliminate your staggered Board and the highly
unusual management entrenchment arrangements built into your two-party merger
agreement.
Those unusual management-entrenchment provisions guarantee no change in the
roles of the proposed four senior executives of the ASARCO-Cyprus combined
company prior to the 2002 annual meeting except upon a vote of 75% of the Board.
Since management will hold 25% of the Board seats, this effectively requires a
unanimous vote of the non-management directors. Because your Board is divided
into three classes, this means that a buyer of 100% of the outstanding stock of
the ASARCO-Cyprus combined company would not be able to obtain management
control for nearly three years.
Indeed, even in the two aspects of your 90-day proposal for which you try
to take credit, there is confusion, contradiction and unnecessary complexity.
You propose an unspecified shareholder mechanism to redeem your poison pill
which is inevitably more cumbersome than simple Board action. Secondly, we noted
with interest the statement in your August 25 press release that "In addition,
change in control provisions in any employment contracts entered into by the
Company will be waived for that same 90 day period." We were therefore surprised
to read the contradictory statement in the Form 8-K you filed yesterday that:
"The rights and benefits under the existing [change of control]
arrangements with the employees... of each of Cyprus Amax and
ASARCO, however, will remain in full force and effect and will be
unaffected during the 90 days following completion of the
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<PAGE> 39
business combination, as will any rights under arrangements
entered into with such employees in substitution for any existing
arrangements."
Frankly, we believe that all of your statements concerning the 90 day
period are no more than a public relations gambit. There is no evidence in your
conduct to date that you have any willingness to pursue transactions that are in
the best interests of your shareholders.
With regard to the three points in your August 25 letter other than the
exchange ratio, we are pleased to confirm that:
- We are prepared to enter into a merger agreement with substantially the
same representations, warranties and covenants as those contained in your
July 15 merger agreement.
- This proposal is not subject to due diligence.
- We have studied the regulatory issues carefully and are confident that
all necessary regulatory approvals for our three way combination will be
obtained on a timely basis. We would be pleased to give you strong
contractual assurances on this point.
If you take seriously your fiduciary duty and want to inform yourselves
about a compelling transaction that would be in the best interests of your
shareholders, let's sit down and negotiate. If not, your shareholders will
decide which alternative they prefer on September 30.
Sincerely,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
------------------------------------------ ------------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
31
<PAGE> 40
THE OFFER
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related letter of transmittal, to exchange 0.3135
shares of Phelps Dodge common stock for each outstanding share of common stock
of Cyprus Amax Minerals Company that is validly tendered on or prior to the
expiration date and not properly withdrawn. We are making our offer through our
wholly owned subsidiary, CAV Corporation, which is a Delaware corporation. The
term "expiration date" means 12:00 midnight, New York City time, on
, 1999, unless we extend the period of time for which this offer
is open, in which case the term "expiration date" means the latest time and date
on which the offer, as so extended, expires. We are also making a separate offer
to exchange 0.4098 shares of Phelps Dodge common stock for each outstanding
share of common stock of ASARCO Incorporated.
If you tender your shares, you will not be obligated to pay any charges or
expenses of the exchange agent or any brokerage commissions. Except as set forth
in the instructions to the letter of transmittal, transfer taxes on the exchange
of Cyprus Amax common stock pursuant to our offer will be paid by us or on our
behalf.
We are making this offer in order to acquire control of, and ultimately the
entire common equity interest in, Cyprus Amax. We intend, as soon as possible
after consummation of the offer, to seek to have Cyprus Amax consummate the
Phelps Dodge/Cyprus Amax merger with us in which each outstanding share of
Cyprus Amax common stock (except for Cyprus Amax common stock held by Cyprus
Amax, us or any of our subsidiaries) would be converted into the right to
receive 0.3135 shares of Phelps Dodge common stock.
If we obtain all of the shares of Cyprus Amax pursuant to our offer to you,
and all of the shares of Asarco pursuant to our separate offer to its
shareholders, former shareholders in Cyprus Amax and Asarco would own
approximately 28% and 16%, respectively, of the shares of common stock of Phelps
Dodge Corporation, based upon the number of shares outstanding of Phelps Dodge,
Cyprus Amax and Asarco on August 13, 1999, August 3, 1999 and July 31, 1999,
respectively.
Our obligation to exchange shares of Phelps Dodge common stock for Cyprus
Amax shares pursuant to the offer is conditioned upon several conditions
referred to below under "Conditions of Our Offer," including the Minimum Tender
Condition, the Rights Plan Condition, the DGCL 203 Condition, the Fair Price
Condition, the Phelps Dodge Stockholder Approval Condition, the HSR Condition
and other conditions that are discussed below.
Our offer to acquire Cyprus Amax common stock is also an offer to acquire
Cyprus Amex preferred share purchase rights ("Cyprus Amax Rights"), and, when we
refer to the shares of Cyprus Amax common stock, we are also referring to the
associated rights, unless we indicate otherwise. In addition, all references to
the rights include the benefits to holders of those rights pursuant to the
Cyprus Amax rights agreement (the "Cyprus Amax Rights Agreement"), including the
right to receive any payment due upon redemption of those rights.
You must tender one Cyprus Amax Right for each Cyprus Amax share tendered
in order to effect a valid tender of Cyprus Amax shares, unless the Cyprus Amax
Rights have been redeemed. The Cyprus Amax Rights are currently represented by
the certificates for the Cyprus Amax shares and your tender of Cyprus Amax
shares prior to the Cyprus Amax Distribution Date will also constitute a tender
of the associated Cyprus Amax Rights. We will not make a separate payment to you
for the Cyprus Amax Rights. Upon the earlier to occur of (a) the close of
business 10 days following a public announcement that a person or group of
associated or affiliated persons other than Cyprus Amax (a "Cyprus Amax
Acquiring Person"), has acquired beneficial ownership of 15% or more of the
outstanding Asarco shares or (b) the close of business 10 business days, or a
later date determined by the Cyprus Amax board of directors, prior to the time
that any person becomes a Cyprus Amax Acquiring Person) following the
commencement of, or a public announcement of an intention to commence, a tender
offer or exchange offer, upon consummation of which such person or group would
be the beneficial owner of 15% or more of such outstanding Cyprus Amax shares
(we refer to the earliest of these dates as the "Cyprus Amax Distribution
Date"), separate certificates representing the Cyprus Amax Rights will be mailed
to holders of record of Cyprus Amax shares as soon as practicable after the
Cyprus Amax Distribution Date, and those separate Cyprus Amax Rights
certificates alone will evidence the
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<PAGE> 41
Cyprus Amax Rights. The Cyprus Amax Distribution Date will occur on September
13, 1999, which is the tenth business day following our public announcement of
our intent to commence our offer unless, before that time, Cyprus Amax 's board
of directors decides to set a later date as the Cyprus Amax Distribution Date.
If the Cyprus Amax Distribution Date occurs and Cyprus Amax or the related
rights agent distributes separate certificates representing the Cyprus Amax
Rights to you prior to the time that you tender your Cyprus Amax shares pursuant
to our offer, certificates representing a number of Cyprus Amax Rights equal to
the number of Cyprus Amax shares tendered must be delivered to the exchange
agent, or, if available, a book-entry confirmation received by the exchange
agent with respect thereto, in order for those Cyprus Amax shares to be validly
tendered. If the Cyprus Amax Distribution Date occurs and separate certificates
representing the Cyprus Amax Rights are not distributed prior to the time Cyprus
Amax shares are tendered pursuant to our offer, Cyprus Amax Rights may be
tendered prior to the time that you receive the certificates for Cyprus Amax
Rights by use of the guaranteed delivery procedure described under "Procedure
for Tendering" below.
We have asked Cyprus Amax for its stockholder list and security position
listings to communicate with you and to distribute our offer to you. We may send
this prospectus, related letter of transmittal and other relevant materials to
you and to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on Cyprus Amax's
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing so that we can later send these materials to
beneficial owners of Cyprus Amax shares after we receive these lists from Cyprus
Amax.
TIMING OF OUR OFFER
Our offer is scheduled to expire at 12:00 midnight, New York City time on
, 1999. For more information, you should read the discussion under the
caption "Extension, Termination and Amendment."
We intend to call a special meeting of our stockholders to be held as soon
as reasonably practicable after the effective date of the Registration Statement
so that we can obtain the approvals necessary to satisfy the Phelps Dodge
Stockholder Approval Condition.
LITIGATION
On August 23, 1999, Phelps Dodge, through its directly owned subsidiary CAV
Corporation, sent a written demand to Cyprus Amax for records of its
shareholders, pursuant to Section 220 of the Delaware General Corporation Law.
On August 24, 1999, Phelps Dodge and its directly owned subsidiary AAV
Corporation commenced an action by order to show cause in the Superior Court of
the State of New Jersey, Chancery Division, Mercer County, pursuant to N.J.S.A.
14A:5-28 to seek shareholder records from Asarco. This action is captioned
Phelps Dodge Corp. and AAV Corp. v. ASARCO Inc., Docket No. MER-C-81-99. In
connection with this action, Phelps Dodge made an application for summary
injunctive relief. Asarco opposed the application and argument was heard before
Judge Judith Yaskin on August 26, 1999. At the hearing, the court ruled that
shareholder lists and related documents must be made available to Phelps Dodge
and AAV within forty-eight hours after the filing of their preliminary proxy
materials with the SEC.
In addition, Phelps Dodge has commenced actions in the Superior Court of
the State of New Jersey and in the Court of Chancery of the State of Delaware
against Asarco and Cyprus Amax and their respective Boards of Directors for
their breach of fiduciary duties including their refusals to consider and to
allow the shareholders of both companies to consider the Phelps Dodge proposal.
In particular, Phelps Dodge alleges that Cyprus Amax and Asarco have
entered into an illegal merger agreement that purports to prohibit the companies
from taking any action or entering into any discussions relating to a takeover
proposal. In light of these provisions of the Asarco/Cyprus Amax Merger
Agreement, Asarco and Cyprus Amax are incapable of evaluating meaningfully the
Phelps Dodge proposal and cannot make informed recommendations to their
shareholders. Phelps Dodge has also challenged the termination or "break up" fee
payable to Asarco in certain circumstances as grossly excessive; that fee
amounts to more than 6% of Asarco's equity value as of July 15, 1999, the date
of the Asarco/Cyprus Amax merger agreement. Furthermore, the Asarco/Cyprus Amax
merger agreement includes corporate governance provisions that
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disenfranchise shareholders by guaranteeing until 2002 the management positions
of the chief executive officers of Asarco and Cyprus Amax unless the positions
are changed with the approval of 75% of the full board.
The complaints also allege that, in addition to their persistent refusals
to negotiate with Phelps Dodge, Asarco and Cyprus Amax set their shareholder
meetings and record dates to favor their own merger and have rewarded management
with lavish compensation and benefit packages. These and other efforts
undertaken by the companies amount to an attempt to favor and entrench
management at the expense of shareholders.
Phelps Dodge is seeking injunctive relief to remedy these breaches of duty,
including court orders declaring that the boards of Asarco and Cyprus Amax
failed to make good faith efforts to obtain information about and adequately
consider the Phelps Dodge proposal and compelling the boards of those two
companies to consider the proposal and remove impediments preventing
consideration of the proposal.
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right, in our sole discretion, at any time or from
time to time, to extend the period of time during which our offer remains open,
and we can do so by giving oral or written notice of such extension to the
exchange agent. If we decide to so extend our offer, we will make an
announcement to that effect no later than 9:00 A.M., New York City time, on the
next business day after the previously scheduled Expiration Date. We are not
making any assurance that we will exercise our right to extend our offer,
although we currently intend to do so until all conditions have been satisfied
or waived. During any such extension, all Asarco shares previously tendered and
not withdrawn will remain subject to the offer, subject to your right to
withdraw your Cyprus Amax shares. You should read the discussion under the
caption "Withdrawal Rights" for more details.
Subject to the SEC's applicable rules and regulations, we also reserve the
right, in our sole discretion, at any time or from time to time, (a) to delay
acceptance for exchange of or, regardless of whether we previously accepted
Cyprus Amax shares for exchange, exchange of any Cyprus Amax shares pursuant to
our offer or to terminate our offer and not accept for exchange or exchange any
Cyprus Amax Shares not previously accepted for exchange, or exchanged, upon the
failure of any of the conditions of the offer to be satisfied and (b) to waive
any condition (other than the Phelps Dodge Stockholder Approval Condition, the
HSR Condition and the condition relating to the effectiveness of the
Registration Statement) or otherwise amend the offer in any respect, by giving
oral or written notice of such delay, termination or amendment to the exchange
agent and by making a public announcement. We will follow any extension,
termination, amendment or delay, as promptly as practicable, with a public
announcement. In the case of an extension, any such announcement will be issued
no later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material
change in the information published, sent or given to stockholders in connection
with the offer be promptly sent to stockholders in a manner reasonably designed
to inform stockholders of such change) and without limiting the manner in which
we may choose to make any public announcement, we assume no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
We confirm to you that if we make a material change in the terms of our
offer or the information concerning the offer, or if we waive a material
condition of the offer, we will extend the offer to the extent required under
the Exchange Act. If, prior to the Expiration Date, we change the percentage of
Cyprus Amax shares being sought or the consideration offered to you, that change
will apply to all holders whose Cyprus Amax shares are accepted for exchange
pursuant to our offer. If at the time notice of that change is first published,
sent or given to you, the offer is scheduled to expire at any time earlier than
the tenth business day from and including the date that such notice is first so
published, sent or given, we will extend the offer until the expiration of that
ten business-day period. For purposes of our offer, a "business day" means any
day other than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 A.M. through 12:00 midnight, New York City time.
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If Cyprus Amax agrees upon a negotiated merger with us, as we have proposed
several times, we may amend or terminate our offer without purchasing any Cyprus
Amax shares.
EXCHANGE OF CYPRUS AMAX SHARES; DELIVERY OF PHELPS DODGE COMMON STOCK
Upon the terms and subject to the conditions of our offer (including, if
the offer is extended or amended, the terms and conditions of any such extension
or amendment), we will accept for exchange, and will exchange, Cyprus Amax
shares validly tendered and not withdrawn as promptly as practicable after the
Expiration Date. In addition, subject to applicable rules of the SEC, we
expressly reserve the right to delay acceptance for exchange or the exchange of
Cyprus Amax shares in order to comply with any applicable law. In all cases,
exchange of Cyprus Amax shares tendered and accepted for exchange pursuant to
the offer will be made only after timely receipt by the exchange agent of
certificates for those Cyprus Amax shares (or a confirmation of a book-entry
transfer of those Cyprus Amax shares in the exchange agent's account at The
Depository Trust Company (which we refer to as the "DTC")) a properly completed
and duly executed letter of transmittal (or a facsimile of that document) and
any other required documents.
For purposes of the offer, we will be deemed to have accepted for exchange
Cyprus Amax shares validly tendered and not withdrawn as, if and when we notify
the exchange agent of our acceptance of the tenders of those Cyprus Amax shares
pursuant to the offer. The exchange agent will deliver Phelps Dodge common stock
in exchange for Cyprus Amax shares pursuant to the offer and cash instead of
fractional shares of Phelps Dodge common stock as soon as practicable after
receipt of such notice. The exchange agent will act as agent for tendering
stockholders for the purpose of receiving Phelps Dodge common stock and cash to
be paid instead of fractional shares of Phelps Dodge common stock from us and
transmitting such stock and cash to you. You will not receive any interest on
the cash to be given for fractional shares, even if there is a delay in making
the exchange.
If we do not accept any tendered Cyprus Amax shares for exchange pursuant
to the terms and conditions of the offer for any reason, or if certificates are
submitted for more Cyprus Amax shares than are tendered, we will return
certificates for such unexchanged Cyprus Amax shares without expense to the
tendering stockholder or, in the case of Cyprus Amax shares tendered by
book-entry transfer of such Cyprus Amax shares into the exchange agent's account
at DTC pursuant to the procedures set forth below under the discussion entitled
"Procedure for Tendering," those Cyprus Amax shares will be credited to an
account maintained within DTC, as soon as practicable following expiration or
termination of the offer.
CASH INSTEAD OF FRACTIONAL SHARES OF PHELPS DODGE COMMON STOCK
We will not issue certificates representing fractional shares of our common
stock pursuant to the offer. Instead, each tendering stockholder who would
otherwise be entitled to a fractional share of our common stock will receive
cash in an amount equal to such fraction (expressed as a decimal and rounded to
the nearest 0.01 of a share) multiplied by the closing price for shares of our
common stock on the NYSE Composite Tape on the date that we accept those Cyprus
Amax shares for exchange.
WITHDRAWAL RIGHTS
Your tender of Cyprus Amax shares pursuant to the offer is irrevocable,
except that Cyprus Amax shares tendered pursuant to the offer may be withdrawn
at any time prior to the Expiration Date, and, unless we previously accepted
them pursuant to the offer, may also be withdrawn at any time after
, 1999.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telegraphic, telex or facsimile transmission notice of withdrawal
at one of its addresses set forth on the back cover of this prospectus, and your
notice must include your name, the number of Cyprus Amax shares to be withdrawn
and the name of the registered holder, if it is different from that of the
person who tendered those Cyprus Amax shares.
A financial institution must guarantee all signatures on the notice of
withdrawal. Most banks, savings and loan associations and brokerage houses are
able to effect these signature guarantees for you. The financial
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institution must be a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program, any of which are an "eligible institution," unless
those Cyprus Amax shares have been tendered for the account of any eligible
institution. If Cyprus Amax shares have been tendered pursuant to the procedures
for book-entry tender discussed under the caption entitled "Procedure for
Tendering," any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Cyprus Amax shares and must
otherwise comply with DTC's procedures. If certificates have been delivered or
otherwise identified to the exchange agent, the name of the registered holder
and the serial numbers of the particular certificates evidencing the Cyprus Amax
shares withdrawn must also be furnished to the exchange agent, as stated above,
prior to the physical release of such certificates. We will decide all questions
as to the form and validity (including time of receipt) of any notice of
withdrawal, in our sole discretion, and our decision shall be final and binding.
Neither we, the exchange agent, the Information Agent, the Dealer Manager nor
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification. Any Cyprus Amax shares properly withdrawn
will be deemed not to have been validly tendered for purposes of our offer.
However, you may retender withdrawn Cyprus Amax shares by following one of the
procedures discussed under the caption entitled "Procedure for Tendering" at any
time prior to the Expiration Date.
If you withdraw any of your Cyprus Amax shares, you automatically withdraw
the associated Cyprus Amax Rights. You may not withdraw Cyprus Amax Rights
unless you also withdraw the associated Cyprus Amax shares.
PROCEDURE FOR TENDERING
For you to validly tender Cyprus Amax shares pursuant to the offer, (a) a
properly completed and duly executed letter of transmittal (or manually executed
facsimile of that document), along with any required signature guarantees, or an
agent's message in connection with a book-entry transfer, and any other required
documents, must be transmitted to and received by the exchange agent at one of
its addresses set forth on the back cover of this prospectus, and certificates
for tendered Cyprus Amax shares must be received by the exchange agent at such
address or those Cyprus Amax shares must be tendered pursuant to the procedures
for book-entry tender set forth below (and a confirmation of receipt of such
tender received (we refer to this confirmation below as a "Book-Entry
Confirmation")), in each case before the Expiration Date, or (b) you must comply
with the guaranteed delivery procedures set forth below.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Cyprus Amax shares and, if applicable, Cyprus
Amax Rights, which are the subject of such Book-Entry Confirmation, that such
participant has received and agrees to be bound by the terms of the letter of
transmittal and that we may enforce that agreement against such participant.
You must tender one Cyprus Amax Right for each Cyprus Amax share tendered
to effect a valid tender of Cyprus Amax shares, unless the Rights Plan Condition
has been satisfied or waived. Unless the Cyprus Amax Distribution Date occurs, a
tender of Cyprus Amax shares will constitute a tender of the associated Cyprus
Amax Rights. If the Cyprus Amax Distribution Date occurs and separate
certificates representing the Cyprus Amax Rights are distributed by Cyprus Amax
or the Rights Agent to holders of Cyprus Amax shares prior to the time that you
tender Cyprus Amax shares pursuant to the offer, certificates representing a
number of Cyprus Amax Rights equal to the number of Cyprus Amax shares tendered
must be delivered to the exchange agent, or, if available, a Book-Entry
Confirmation received by the exchange agent with respect thereto, in order for
such Cyprus Amax shares to be validly tendered. If the Cyprus Amax Distribution
Date occurs and separate certificates representing the Cyprus Amax Rights are
not distributed prior to the time that you tender Cyprus Amax shares pursuant to
the offer, Cyprus Amax Rights may be tendered prior to a stockholder's receipt
of the certificates for Cyprus Amax Rights by use of the guaranteed delivery
procedures described below. If Cyprus Amax Rights certificates are distributed
but are not available to you before Cyprus Amax shares are tendered pursuant to
the offer, a tender of Cyprus Amax shares constitutes an agreement by
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you to deliver to the exchange agent pursuant to the guaranteed delivery
procedures described below, prior to the expiration of the period to be
specified in the notice of guaranteed delivery and the related letter of
transmittal for delivery of Cyprus Amax Rights certificates or a Book-Entry
Confirmation for Cyprus Amax Rights (we refer to this as the "Cyprus Amax Rights
Delivery Period"), Cyprus Amax Rights certificates representing a number of
Cyprus Amax Rights equal to the number of Cyprus Amax shares tendered. We
reserve the right to require receipt of such Cyprus Amax Rights certificates (or
a Book-Entry Confirmation with respect to such Cyprus Amax Rights) prior to
accepting Cyprus Amax shares for exchange.
Nevertheless, we will be entitled to accept for exchange Cyprus Amax shares
that you tender prior to receipt of the Cyprus Amax Rights certificates required
to be tendered with such Cyprus Amax shares or a Book-Entry Confirmation with
respect to such Cyprus Amax Rights and either (a) subject to complying with
applicable rules and regulations of the SEC, withhold payment for such Cyprus
Amax shares pending receipt of the Cyprus Amax Rights certificates or a
Book-Entry Confirmation for those Cyprus Amax Rights or (b) exchange Cyprus Amax
shares accepted for exchange pending receipt of the Cyprus Amax Rights
certificates or a Book-Entry Confirmation for such Cyprus Amax Rights in
reliance upon the guaranteed delivery procedures described below. In addition,
after expiration of the Cyprus Amax Rights Delivery Period, we may instead elect
to reject as invalid a tender of Cyprus Amax shares with respect to which Cyprus
Amax Rights certificates or a Book-Entry Confirmation for an equal number of
Cyprus Amax Rights have not been received by the exchange agent. Any
determination by us to make payment for Cyprus Amax shares in reliance upon such
guaranteed delivery procedure or, after expiration of the Cyprus Amax Rights
Delivery Period, to reject a tender as invalid, shall be made, subject to
applicable law, in our sole and absolute discretion.
The exchange agent will establish accounts with respect to the Cyprus Amax
shares at DTC for purposes of the offer within two business days after the date
of this prospectus, and any financial institution that is a participant in DTC
may make book-entry delivery of the Cyprus Amax shares by causing DTC to
transfer such Cyprus Amax shares into the exchange agent's account in accordance
with DTC's procedure for such transfer. However, although delivery of Cyprus
Amax shares may be effected through book-entry at DTC, the letter of transmittal
(or facsimile thereof), with any required signature guarantees, or an agent's
message in connection with a book-entry transfer, and any other required
documents, must, in any case, be transmitted to and received by the exchange
agent at one or more of its addresses set forth on the back cover of this
prospectus prior to the Expiration Date, or the guaranteed delivery procedures
described below. We cannot assure you, however, that book-entry delivery of
Cyprus Amax Rights will be available. If book-entry delivery is not available,
you must tender Cyprus Amax Rights by means of delivery of Cyprus Amax Rights
certificates or pursuant to the guaranteed delivery procedure set forth below.
Signatures on all Letters of Transmittal must be guaranteed by an eligible
institution, except in cases in which Cyprus Amax shares are tendered either by
a registered holder of Cyprus Amax shares who has not completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the letter of transmittal or for the account of an eligible
institution.
If the certificates for Cyprus Amax shares or Cyprus Amax Rights (if any)
are registered in the name of a person other than the person who signs the
letter of transmittal, or if certificates for unexchanged Cyprus Amax shares or
Cyprus Amax Rights (if any) are to be issued to a person other than the
registered holder(s), the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered owner or owners appear on the certificates, with the signature(s)
on the certificates or stock powers guaranteed in the manner we have described
above.
THE METHOD OF DELIVERY OF CYPRUS AMAX SHARE CERTIFICATES AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ENSURE TIMELY DELIVERY.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH
RECEIVED INSTEAD OF FRACTIONAL SHARES OF OUR COMMON STOCK, YOU MUST PROVIDE THE
EXCHANGE AGENT WITH YOUR CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY
WHETHER YOU ARE SUBJECT TO BACKUP WITHHOLDING OF FEDERAL INCOME TAX BY
COMPLETING THE
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SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SOME STOCKHOLDERS
(INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND SOME FOREIGN INDIVIDUALS) ARE NOT
SUBJECT TO THESE BACKUP WITHHOLDING AND REPORTING REQUIREMENTS. IN ORDER FOR A
FOREIGN INDIVIDUAL TO QUALIFY AS AN EXEMPT RECIPIENT, THE STOCKHOLDER MUST
SUBMIT A FORM W-8, SIGNED UNDER PENALTIES OF PERJURY, ATTESTING TO THAT
INDIVIDUAL'S EXEMPT STATUS.
If you wish to tender Cyprus Amax shares pursuant to our offer and your
certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the exchange agent prior to the
Expiration Date or cannot complete the procedure for book-entry transfer on a
timely basis, your Cyprus Amax shares may nevertheless be tendered, so long as
all of the following conditions are satisfied:
(a) you make your tender by or through an eligible institution;
(b) a properly completed and duly executed notice of guaranteed
delivery, substantially in the form made available by us, is received by
the exchange agent as provided below on or prior to the expiration date;
and
(c) the certificates for all tendered Cyprus Amax shares (or a
confirmation of a book-entry transfer of such securities into the exchange
agent's account at DTC as described above), in proper form for transfer,
together with a properly completed and duly executed letter of transmittal
(or facsimile thereof), with any required signature guarantees (or, in the
case of a book-entry transfer, an agent's message) and all other documents
required by the letter of transmittal are received by the exchange agent
within three NYSE trading days after the date of execution of such notice
of guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
telegram, telex, facsimile transmission or mail to the exchange agent and you
must include a guarantee by an eligible institution in the form set forth in
that notice.
In all cases, we will exchange Cyprus Amax shares tendered and accepted for
exchange pursuant to our offer only after timely receipt by the exchange agent
of certificates for Cyprus Amax shares (or timely confirmation of a book-entry
transfer of such securities into the exchange agent's account at DTC as
described above), properly completed and duly executed letter(s) of transmittal
(or facsimile(s) thereof), or an agent's message in connection with a book-entry
transfer, and any other required documents. Accordingly, you may be paid at
different times depending upon when the exchange agent actually receives
certificates for Cyprus Amax shares or confirmations of book-entry transfers of
those shares.
By executing a letter of transmittal as set forth above, you irrevocably
appoint our designees as your attorneys-in-fact and proxies, each with full
power of substitution, to the full extent of your rights with respect to your
Cyprus Amax shares tendered and accepted for exchange by us and with respect to
any and all other Cyprus Amax shares and other securities issued or issuable in
respect of the Cyprus Amax shares on or after , 1999. That
appointment is effective, and voting rights will be affected, when and only to
the extent that we deposit the shares of our common stock for Cyprus Amax shares
that you have tendered with the exchange agent. All such proxies shall be
considered coupled with an interest in the tendered Cyprus Amax shares and
therefore shall not be revocable. Upon the effectiveness of such appointment,
all prior proxies that you have given will be revoked, and you may not give any
subsequent proxies (and, if given, they will not be deemed effective). Our
designees will, with respect to the Cyprus Amax shares for which the appointment
is effective, be empowered, among other things, to exercise all of your voting
and other rights as they, in their sole discretion, deem proper at any annual,
special or adjourned meeting of Cyprus Amax's stockholders or otherwise. We
reserve the right to require that, in order for Cyprus Amax shares to be deemed
validly tendered, immediately upon our exchange of those Cyprus Amax shares, we
must be able to exercise full voting rights with respect to such Cyprus Amax
shares.
We will determine questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of Cyprus
Amax shares, in our sole discretion, and our determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of Cyprus
Amax shares that we determine are not in proper form or the acceptance of or
exchange for which may, in the opinion of our counsel, be unlawful. We also
reserve the absolute right to waive any of the conditions of our offer (other
than the HSR Condition, the Phelps Dodge Stockholder Approval Condition, the
condition relating to the
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effectiveness of the Registration Statement or, after the Phelps Dodge
Stockholder Approval Condition has been satisfied, the legal opinion as to tax
matters referred to below) or any defect or irregularity in the tender of any
Cyprus Amax shares. No tender of Cyprus Amax shares will be deemed to have been
validly made until all defects and irregularities in tenders of Cyprus Amax
shares have been cured or waived. Neither we, the exchange agent, the
Information Agent, the Dealer Manager nor any other person will be under any
duty to give notification of any defects or irregularities in the tender of any
Cyprus Amax shares or will incur any liability for failure to give any such
notification. Our interpretation of the terms and conditions of our offer
(including the letter of transmittal and instructions thereto) will be final and
binding.
The tender of Cyprus Amax shares and Cyprus Amax Rights (if any) pursuant
to any of the procedures described above will constitute a binding agreement
between us and you upon the terms and subject to the conditions of the offer.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the anticipated material U.S. federal income tax
consequences of the acquisition of our common stock by you, pursuant to our
offer and the Phelps Dodge/Cyprus Amax merger contemplated by this prospectus.
This discussion applies only to a "U.S. Holder," which is a term that we explain
below. This summary does not address any tax consequences of our offer or the
Phelps Dodge/Cyprus Amax merger to U.S. Holders who exercise dissenters' rights,
if any. It applies only to shares of Cyprus Amax common stock held as capital
assets and does not address aspects of U.S. federal income tax that may apply to
holders that are subject to special tax rules, including:
- insurance companies,
- tax-exempt organizations,
- financial institutions,
- dealers in securities,
- traders in securities who elect to apply a mark-to-market method of
accounting,
- foreign persons,
- persons who acquired shares of Cyprus Amax common stock pursuant to an
exercise of employee stock options or rights or otherwise as
compensation, and
- persons who hold shares of Cyprus Amax common stock as part of a
straddle, conversion transaction, or construction sale.
Also, this summary does not address state, local or foreign tax consequences of
our offer or the Phelps Dodge/ Cyprus Amax merger. This summary is based on
current law, and future legislative, judicial or administrative changes or
interpretations, which may be retroactive, could affect the accuracy of this
discussion.
For purposes of this discussion, a "U.S. Holder" means a holder of Cyprus
Amax shares that is
- a citizen or resident of the United States,
- a corporation organized in or under the laws of the United States or any
political subdivision thereof or therein,
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or
- a trust if a U.S. court can exercise primary supervision over the
administration of such trust and one or more U.S. persons has the
authority to control all of the substantial decisions of such trust.
WE STRONGLY ADVISE EACH U.S. HOLDER TO CONSULT HIS OR HER OWN TAX ADVISOR
AS TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
PARTICULAR FACTS AND CIRCUMSTANCES THAT MAY BE UNIQUE TO SUCH U.S. HOLDER, AND
AS TO ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE MERGER.
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We will not be obligated to complete the merger unless we receive an
opinion of Shearman & Sterling, special counsel to us, in form and substance
reasonably satisfactory to us, dated the closing date, substantially that, on
the basis of facts, factual representations of the parties to the Phelps
Dodge/Cyprus Amax merger and customary assumptions set forth in such opinion
that are consistent with the state of facts existing on the closing date, the
exchange of Cyprus Amax common stock for our common stock pursuant to our offer
and the Phelps Dodge/Cyprus Amax merger will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code (the "Code").
We may not waive the condition relating to that opinion after receipt of the
Phelps Dodge Stockholder Approval, unless further stockholder approval is
obtained with appropriate disclosure. That tax opinion will not be binding on
the Internal Revenue Service (the "IRS") or the courts, and the parties do not
intend to request a ruling from the IRS with respect to the merger. Accordingly,
we cannot be certain that the IRS will not challenge the conclusions reflected
in those opinions or that a court will not sustain such challenge.
Assuming that the exchange of Cyprus Amax common stock for our common stock
pursuant to our offer and the Phelps Dodge/Cyprus Amax merger will be treated
for U.S. federal income tax purposes as an exchange pursuant to a plan of
reorganization within the meaning of Section 368(a) of the Code, the following
U.S. federal income tax consequences will result:
(i) neither we nor Cyprus Amax will recognize any gain or loss with
respect to the exchange of Cyprus Amax shares for our common stock as a
result of our offer and the Phelps Dodge/Cyprus Amax merger;
(ii) a U.S. Holder will not recognize any gain or loss on the exchange
of all of such U.S. Holder's Cyprus Amax shares for our common stock,
except as described below with respect to the receipt of cash instead of
fractional shares of our common stock, and subject to the discussion below
of the surrender of Cyprus Amax Rights that have become exercisable;
(iii) the aggregate adjusted tax basis of shares of our common stock
received by a U.S. Holder (including fractional shares of our common stock
deemed received and redeemed as described below) will be the same as the
aggregate adjusted tax basis of the Cyprus Amax shares exchanged therefor;
(iv) the holding period of shares of our common stock (including the
holding period of fractional shares of our common stock) received by a U.S.
Holder will include the holding period of the Cyprus Amax shares exchanged
therefor; and
(v) a U.S. Holder of Cyprus Amax shares who receives cash instead of a
fractional share of our common stock and who does not otherwise hold shares
of our common stock will generally recognize capital gain or loss equal to
the difference between the amount of cash received and the U.S. Holder's
adjusted tax basis in such fractional share. The capital gain or loss will
be long-term capital gain or loss if the U.S. Holder's holding period in
the fractional share is more than one year. A U.S. Holder who separately
holds shares of our common stock should consult his or her own tax advisor
concerning the treatment of cash received for a fractional share.
Because there is no specific binding authority dealing with securities such
as the Cyprus Amax Rights, we express no view with respect to the U.S. federal
income tax treatment of the Cyprus Amax Rights becoming separately transferable
apart from the Cyprus Amax shares, the redemption of the Cyprus Amax Rights or
the acquisition by us of the Cyprus Amax Rights. Stockholders should consult
their tax advisors as to the tax consequences of transactions with respect to
the Cyprus Amax Rights.
EFFECT OF OFFER ON MARKET FOR CYPRUS AMAX SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
The exchange of Cyprus Amax shares pursuant to our offer will reduce the
number of holders of Cyprus Amax shares and the number of Cyprus Amax shares
that might otherwise trade publicly and could adversely affect the liquidity and
market value of the remaining Cyprus Amax shares held by the public. Cyprus Amax
shares are listed and principally traded on the NYSE and are also listed on the
Philadelphia and Pacific Stock Exchanges. Depending on the number of Cyprus Amax
shares acquired pursuant to the offer, following consummation of the offer,
Cyprus Amax shares may no longer meet the requirements of such exchanges for
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continued listing. For example, published guidelines of the NYSE indicate that
the NYSE would consider delisting the outstanding Cyprus Amax shares if, among
other things, (i) the number of publicly held Cyprus Amax shares (exclusive of
holdings of officers, directors and members of their immediate families and
other concentrated holdings of 10 percent or more) should fall below 600,000,
(ii) the number of record holders of 100 or more Cyprus Amax shares should fall
below 1,200 or (iii) the aggregate market value of publicly held shares should
fall below $5 million.
According to publicly available information, there were, as of August 18,
1999, approximately 90.5 million Cyprus Amax common shares outstanding.
If such exchanges were to delist the Cyprus Amax shares, the market for
them could be adversely affected. It is possible that Cyprus Amax shares would
be traded on other securities exchanges or in the over-the-counter market, and
that price quotations would be reported by such exchanges, or through the
National Association of Securities Dealers, Inc., Automated Quotations System
("Nasdaq") or by other sources. The extent of the public market for the Cyprus
Amax shares and the availability of such quotations would, however, depend upon
the number of holders and/or the aggregate market value of the Cyprus Amax
shares remaining at such time, the interest in maintaining a market in the
Cyprus Amax shares on the part of securities firms, the possible termination of
registration of Cyprus Amax shares under the Exchange Act, as described below,
and other factors.
The Cyprus Amax shares are presently "margin securities" under the
regulations of the Federal Reserve Board, which has the effect, among other
things, of allowing brokers to extend credit on the collateral of Cyprus Amax
shares. Depending on the factors similar to those described above with respect
to listing and market quotations, following consummations of the offer, the
Shares may no longer constitute "margin securities" for the purposes of the
Federal Reserve Board's margin regulations, in which event the Cyprus Amax
Shares would be ineligible as collateral for margin loans made by brokers. For a
description of the treatment of Shares in the Merger, you should refer to
"Purpose of the Offer; the Phelps Dodge/Cyprus Amax Merger."
Cyprus Amax shares are currently registered under the Exchange Act. Cyprus
Amax can terminate that registration upon application to the SEC if the
outstanding shares are not listed on a national securities exchange and if there
are fewer than 300 holders of record of Cyprus Amax shares. Termination of
registration of the Cyprus Amax shares under the Exchange Act would reduce the
information that Cyprus Amax must furnish to its shareholders and to the SEC and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirement of furnishing a
proxy statement in connection with shareholders meetings pursuant to Section
14(a) and the related requirement of furnishing an annual report to
shareholders, no longer applicable with respect to Cyprus Amax shares.
Furthermore, the ability of "affiliates" of Cyprus Amax and persons holding
"restricted securities" of Cyprus Amax to dispose of such securities pursuant to
Rule 144 under the Securities Act may be impaired or eliminated. If registration
of the shares under the Exchange Act were terminated, they would no longer be
eligible for Nasdaq reporting or for continued inclusion on the Federal Reserve
Board's list of "margin securities."
PURPOSE OF OUR OFFER; THE PHELPS DODGE/CYPRUS AMAX MERGER
We are making the offer in order to acquire control of, and ultimately the
entire common equity interest in, Cyprus Amax. The offer is the first step in
our acquisition of Cyprus Amax, and is intended to facilitate the acquisition of
all Cyprus Amax shares. You will not have appraisal rights as a result of
consummation of our offer. We intend, as soon as practicable after consummation
of the offer, to seek to merge Cyprus Amax with and into a wholly owned
subsidiary. The purpose of the Phelps Dodge/Cyprus Amax merger is to acquire all
Cyprus Amax shares not tendered and exchanged pursuant to the offer. In the
Phelps Dodge/Cyprus Amax merger, each then outstanding Cyprus Amax share (except
for Cyprus Amax shares held in Cyprus Amax's treasury and Cyprus Amax shares
that we or one of our subsidiaries owns) would be converted into the right to
receive 0.3135 shares of Phelps Dodge common stock. The Phelps Dodge/Cyprus Amax
merger may be consummated pursuant to Section 253 of the DGCL. Under Section 253
of the DGCL, a parent corporation
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owning at least 90% of the outstanding shares of each class of a subsidiary
corporation may merge the subsidiary corporation into itself without the
approval of the stockholders of the parent corporation or of the board of
directors or stockholders of the subsidiary corporation. Assuming the Minimum
Tender Condition is satisfied and we consummate the offer, we would have
sufficient voting power to effect the Phelps Dodge/ Cyprus Amax merger under
Section 251 of the DGCL without the vote of any other stockholder of Cyprus
Amax.
Although stockholders do not have appraisal rights as a result of the
offer, if the Phelps Dodge/Cyprus Amax merger is consummated pursuant to Section
253 of the DGCL, Cyprus Amax stockholders at the time of the Phelps Dodge/Cyprus
Amax merger who do not vote in favor of the Phelps Dodge/Cyprus Amax merger will
have the right under the DGCL to dissent and demand appraisal of their Cyprus
Amax shares in accordance with Section 262 of the DGCL. Under Section 262,
dissenting stockholders who comply with the applicable statutory procedures will
be entitled to receive a judicial determination of the fair value of their
Cyprus Amax shares (exclusive of any element of value arising from the
accomplishment or expectation of the Phelps Dodge/Cyprus Amax merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. In Cede & Co. and Cinerama, Inc. v. Technicolor, Inc., the
Supreme Court of the State of Delaware construed Section 262 of the DGCL and
held that the "accomplishment or expectation" exclusion from the calculation of
fair value set forth in the preceding sentence is narrow and is designed to
eliminate use of pro forma data and projections of a speculative variety
relating to the completion of a merger. The court held that it is appropriate to
include in the calculation of fair value any known elements of value, including
those elements of value which exist on the date of the merger because of a
majority acquiror's interim action in a two-step cash-out transaction. We cannot
assure you as to the methodology a court would use to determine fair value or
how a court would select which of the elements of value are to be included in
such a determination. Any such judicial determination of the fair value of
Cyprus Amax shares could be based upon factors other than, or in addition to,
the price per Cyprus Amax share to be paid in the Phelps Dodge/ Cyprus Amax
merger or the market value of the Cyprus Amax shares. The value so determined
could be more or less than the price per Cyprus Amax share to be paid in the
Phelps Dodge/Cyprus Amax merger.
Even if the Minimum Tender Condition is satisfied and the offer is
consummated, we reserve the right to effect the Phelps Dodge/Cyprus Amax merger
pursuant to Section 251 of the DGCL. Assuming the Cyprus Amax shares remain
listed on a national securities exchange or are then quoted through NASDAQ or
held of record by more than 2,000 holders, the holders of Cyprus Amax shares
will not have appraisal rights if the Phelps Dodge/Cyprus Amax merger is
consummated pursuant to Section 251 of the DGCL. However, if the Phelps
Dodge/Cyprus Amax merger is so consummated, and if, on the date fixed to
determine stockholders entitled to vote on the Phelps Dodge/Cyprus Amax merger,
the Cyprus Amax shares are not listed on a national securities exchange or
quoted through NASDAQ or held of record by more than 2,000 holders, you may have
appraisal rights pursuant to the provisions of Section 262 of the DGCL as
described above.
Rule 13e-3 of the General Rules and Regulations under the Exchange Act,
which we do not believe would apply to the Phelps Dodge/Cyprus Amax merger if
the Phelps Dodge/Cyprus Amax merger occurred within one year of consummation of
our offer, would require, among other things, that some financial information
concerning Cyprus Amax, and some information relating to the fairness of the
proposed transaction and the consideration offered to stockholders of Cyprus
Amax therein, be filed with the SEC and disclosed to you prior to consummation
of the Phelps Dodge/Cyprus Amax merger.
In addition, we reserve the right to acquire, following the consummation or
termination of our offer, additional Cyprus Amax shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer,
or otherwise, upon such terms and at such prices as we decide, which may be more
or less favorable than those of the offer. We and our affiliates also reserve
the right to dispose of any or all Cyprus Amax shares acquired by us pursuant to
the offer or otherwise, upon such terms and at such prices as we shall
determine.
It is our current intention that, following consummation of our offer, we
would cause Cyprus Amax to redeem all 4,664,000 shares of its Series A
Convertible Preferred Stock, which are redeemable at Cyprus Amax's option. Any
final decision as to whether to redeem those shares will be made in light of
circumstances existing at that time.
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Upon consummation of our offer, we intend to take appropriate actions to
optimize and rationalize the combined entities' assets, operations, exploration
activities, management, personnel general and administrative functions and
corporate structure. Except as we have otherwise discussed elsewhere in this
prospectus, we do not have any plans or proposals right now that would result in
an extraordinary corporate transaction, such as a merger, reorganization or
liquidation, or sale of a material amount of assets, involving Cyprus Amax or
any of its subsidiaries, or any material changes in Cyprus Amax's corporate
structure or business, or any change in its management. Cyprus Amax has not
given us any access to its books and records, however, so we might decide upon
such changes once we complete such a review.
As described under the caption entitled "Reasons for the Proposed
Combination" upon consummation of the Phelps Dodge/Cyprus Amax merger, we expect
to realize substantial cost savings in both administrative and operational
areas.
Upon consummation of our offer, we may also elect or seek the election of
nominees of our choice to Cyprus Amax's Board of Directors.
CONDITIONS OF OUR OFFER
Our offer is subject to a number of conditions, which are described below:
MINIMUM TENDER CONDITION
There must be validly tendered, prior to the expiration of the offer and
not withdrawn, a number of Cyprus Amax shares which will constitute at least a
majority of the total number of outstanding Cyprus Amax shares on a fully
diluted basis (as though all options or other securities convertible into or
exercisable or exchangeable for Cyprus Amax shares had been so converted,
exercised or exchanged) as of the date that we accept the Cyprus Amax shares for
exchange pursuant to our offer.
RIGHTS PLAN CONDITION
This condition would be satisfied if the board of directors of Cyprus Amax
redeems the Cyprus Amax Rights or amends the Cyprus Amax Rights Agreement so
that the Cyprus Amax Rights would not be triggered by the offer and the Phelps
Dodge/Cyprus Amax merger, or a court of competent jurisdiction invalidates the
Cyprus Amax Rights Agreement.
DGCL 203 CONDITION
This condition would be satisfied if either: (a) the board of directors of
Cyprus Amax approves the offer for purposes of Section 203 of the DGCL or (b) we
acquire 85% or more of the voting stock of Cyprus Amax pursuant to the offer.
Section 203 of the DGCL, in general, prohibits a Delaware corporation such
as Cyprus Amax from engaging in a "business combination" (as defined in Section
203) with an "interested stockholder" (as defined in Section 203) for a period
of three years following the date that such person became an interested
stockholder unless (a) prior to the date that such person became an interested
stockholder, the board of directors of the corporation approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder, (b) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held by
directors who are also officers of the corporation and employee stock plans that
do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
(c) the business combination is proposed prior to the consummation or
abandonment of and subsequent to the public announcement of a proposed
transaction which (i) constitutes a merger or consolidation of the corporation,
(ii) is with or by a person who either was not an interested stockholder during
the previous three years or who became an interested stockholder with the
approval of the corporation's board of directors or during the period described
in Section 203(b)(7) of the DGCL and (iii) is approved or not
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opposed by a majority of the board of directors then in office who were
directors prior to any person becoming an interested stockholder during the
previous three years, or (d) on or subsequent to the date such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders, and
not by written consent, by the affirmative vote of the holders of at least
66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder. The full text of Section 203 of the DGCL has been
annexed as Schedule A to this prospectus and is incorporated herein by
reference.
FAIR PRICE CONDITION
This condition, which would limit the ability of Phelps Dodge to enter into
the Phelps Dodge/Cyprus Amax merger if the offer is consummated, would be
satisfied if either (a) the board of directors of Cyprus Amax approves the
Phelps Dodge/Cyprus Amax Merger for purposes of Article Sixth of the Cyprus Amax
Restated Certificate of Incorporation or (b) we acquire 75% or more of the
outstanding voting stock of Cyprus Amax.
PHELPS DODGE STOCKHOLDER APPROVAL CONDITION
Pursuant to the rules of the NYSE (on which our common stock is listed),
the issuance of our common stock pursuant to the offer and the Phelps
Dodge/Cyprus Amax merger must be approved by the holders of a majority of the
shares voted at a meeting of such holders at which the total number of votes
cast represents over 50% of all shares of our common stock outstanding on the
applicable record date because the number of shares of our common stock to be
issued will be equal to or in excess of 20% of the shares outstanding prior to
such issuance. We intend to seek this approval at a special stockholders meeting
that we intend to hold as soon as practicable after the effective date of this
Registration Statement.
HSR CONDITION
Our offer is conditioned upon the waiting period (and any extension
thereof) applicable to the offer under the HSR Act having expired or been
terminated.
Under the HSR Act, and the rules that have been promulgated thereunder (the
"Rules"), some acquisitions may not be consummated unless information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and some waiting period
requirements have been satisfied. The acquisition of Cyprus Amax shares pursuant
to our offer is subject to the HSR Act. We will file with the Antitrust Division
and the FTC a Hart-Scott-Rodino Notification and Report Form with respect to our
offer. Under the applicable provisions of the HSR Act, the purchase of Cyprus
Amax shares under the offer cannot be consummated until the expiration or early
termination of a waiting period that begins after we file that Report Form. The
initial waiting period under the HSR Act is 30 days. Either the FTC or the
Antitrust Division may issue a request for additional information or documentary
material, which will extend the waiting period until 20 days after compliance
with such request. Federal and state antitrust enforcement agencies frequently
scrutinize under the antitrust laws transactions such as our acquisition of
Cyprus Amax shares pursuant to our offer. At any time before or after we acquire
Cyprus Amax shares, any such agency could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the acquisition of Cyprus Amax shares pursuant to the offer or
otherwise or seeking divestiture of Cyprus Amax shares acquired by us or
divestiture of assets of Phelps Dodge and/or Cyprus Amax. Private parties may
also bring legal action under the antitrust laws under some circumstances.
Phelps Dodge, Asarco and Cyprus Amax conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of our offer. See "-- Other
Conditions of Our Offer."
Some large Cyprus Amax stockholders (those that would receive more than $15
million in Phelps Dodge shares or, in certain cases, more than 10% of Phelps
Dodge's shares) may be required to make separate filings with the FTC and
Antitrust Division under the HSR Act and the Rules in conjunction with the
receipt of shares of our common stock. If you must make such a filing, you will
then be required to observe applicable waiting periods under the HSR Act and the
Rules before receiving shares of Phelps Dodge common stock. If
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you are obligated to make such a filing, we will deposit the shares of our
common stock to be exchanged, pursuant to the Rules, pending expiration or early
termination of the waiting period.
Although no assurances can be given, we anticipate that the HSR Condition
will be satisfied on a timely basis.
OTHER CONDITIONS OF OUR OFFER
Notwithstanding any other provision of our offer, we shall not be required
to accept for exchange or exchange any Cyprus Amax shares, may postpone the
acceptance for exchange of or exchange for tendered Cyprus Amax shares, and may,
in our sole discretion, terminate or amend the offer as to any Cyprus Amax
shares not then exchanged (a) if at the expiration date, any of the Minimum
Tender Condition, the Rights Plan Condition, the DGCL 203 Condition, the Fair
Price Condition, the Phelps Dodge Stockholder Approval Condition or the HSR
Condition has not been satisfied or, with respect to the Minimum Tender
Condition, the Rights Plan Condition, the DGCL 203 Condition, or the Fair Price
Condition, waived, or (b) if on or after the date of this prospectus and at or
prior to the time of exchange of any such Cyprus Amax shares (whether or not any
Cyprus Amax shares have theretofore been accepted for exchange or exchanged
pursuant to the offer), any of our other conditions are not satisfied. Those
conditions are as follows:
(a) The shares of our common stock which shall be issued to Cyprus
Amax stockholders in the offer and the Phelps Dodge/Cyprus Amax merger have
been authorized for listing on the NYSE, subject to official notice of
issuance;
(b) The Registration Statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued nor shall there have been
proceedings for that purpose initiated or threatened by the SEC and we
shall have received all necessary state securities law or "blue sky"
authorizations;
(c) No temporary restraining order, preliminary or permanent
injunction or other order or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the offer or any of the other transactions contemplated
by this prospectus shall be in effect; no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any court, administrative agency or commission or other
governmental authority or instrumentality which prohibits, restricts or
makes illegal the consummation of our offer; nor shall there have been a
failure to obtain any required consent or approval under foreign laws or
regulations which would prohibit the consummation of the offer or would
have a material adverse effect on us or on Cyprus Amax;
(d) There shall not be pending any suit, action or proceeding by any
governmental entity (a) challenging the offer, seeking to restrain or
prohibit the consummation of the offer or seeking to obtain from Cyprus
Amax or us any damages that are material in relation to Cyprus Amax and its
subsidiaries taken as a whole, (b) seeking to prohibit or limit the
ownership or operation by Cyprus Amax or us or any of our subsidiaries of
any material portion of the business or assets of Cyprus Amax or us or any
of our subsidiaries or to compel Cyprus Amax or us or any of our
subsidiaries, to dispose of or hold separate any material portion of the
business or assets of Cyprus Amax or us or any of our, as a result of the
offer, (c) seeking to prohibit us from effectively controlling in any
material respect the business or operations of Cyprus Amax or (d) which
otherwise is reasonably likely to have a material adverse effect on us or
Cyprus Amax;
(e) Cyprus Amax stockholders (i) have voted to reject the
Asarco/Cyprus Amax merger; (ii) a record date for the Asarco/Cyprus Amax
merger is in effect and we are satisfied, in our sole discretion, that we
will have full voting rights as of such record date with respect to all
Cyprus Amax shares that we have accepted pursuant to our offer, or (iii)
the Asarco/Cyprus Amax Merger Agreement is otherwise terminated (the
"Asarco-Cyprus Amax Merger Agreement Condition"); and
(f) We receive the opinion of Shearman & Sterling as to tax matters,
as outlined above.
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(g) The representations and warranties of Cyprus Amax in the
Asarco-Cyprus Amax Merger Agreement shall be true and correct (without
giving effect to any qualification as to "materiality" of "Material Adverse
Effect" set forth therein) as of the date of this prospectus and as of the
expiration date as though made on and as of the date of this prospectus and
the expiration date 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 (as
defined therein) on Cyprus Amax.
The conditions to the offer are substantially identical to the conditions
to each of Asarco and Cyprus Amax to effect the mergers under the Asarco/Cyprus
Amax Merger Agreement except that:
(a) Phelps Dodge does not have to accept for exchange or exchange any
Cyprus Amax shares pursuant to the offer, or can terminate or amend the
offer if the stockholders of Cyprus Amax have approved the Asarco/Cyprus
Amax Merger Agreement.
(b) Cyprus Amax does not have to effect the Asarco-Cyprus Amax mergers
unless it receives an opinion of its counsel to the effect that the Cyprus
Amax merger, taken together with the Asarco merger, will qualify as a
transaction described in Section 351 of the IRS Code.
(c) Neither Asarco nor Cyprus Amax must effect the Asarco-Cyprus Amax
mergers if either party fails to receive shareholder approval.
(d) Neither Asarco nor Cyprus Amax must effect the Asarco-Cyprus Amax
mergers if either party does not receive "comfort" letters from their
respective independent accountants.
(e) Neither Asarco nor Cyprus Amax must effect the Asarco-Cyprus Amax
mergers unless the other party has performed in all material respects its
obligations required to be performed by it under the Asarco-Cyprus Amax
Merger Agreement at or prior to the closing of the Asarco-Cyprus Amax
mergers, and each of Asarco and Cyprus Amax must receive a certificate from
the other party's Chairman of the Board, Chief Executive Officer and
President, certifying to that effect.
(f) Phelps Dodge does not have to accept for exchange or exchange any
Cyprus Amax shares pursuant to the offer if the Minimum Tender Condition,
the Rights Plan Condition, the Phelps Dodge Stockholder Approval Condition,
the Fair Price Condition, the DGCL 203 Condition and the HSR Condition are
not satisfied.
The foregoing conditions are solely for our benefit and we may assert them
regardless of the circumstances giving rise to any such conditions (including
any action or inaction by us). We may waive these conditions in whole or in part
(other than the Phelps Dodge Stockholder Approval Condition, the HSR Condition,
the condition relating to effectiveness of the Registration Statement and, after
the Phelps Dodge Stockholder Approval Condition has been satisfied, the
condition relating to the legal opinion as to tax matters referred to above).
The determination as to whether any condition has been satisfied shall be in our
sole judgment and will be final and binding on all parties. The failure by us at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed a continuing right which may
be asserted at any time and from time to time. Notwithstanding the fact that we
reserve the right to assert the failure of a condition following acceptance for
exchange but prior to exchange in order to delay exchange or cancel its
obligation to exchange properly tendered Cyprus Amax shares, we will either
promptly exchange such Cyprus Amax shares or promptly return such Cyprus Amax
shares.
RELATIONSHIPS WITH CYPRUS AMAX
Except as set forth herein, neither we nor, to the best of our knowledge,
any of our directors, executive officers or other affiliates has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of Cyprus Amax, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies. Except as described herein, there have been no contacts,
negotiations or transactions since January 1, 1996, between us or, to the best
of our knowledge, any of our directors, executive officers or other
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affiliates on the one hand, and Cyprus Amax or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets. Neither we, nor, to the best of our knowledge,
any of our directors, executive officers or other affiliates has since January
1, 1996 had any transaction with Cyprus Amax or any of its executive officers,
directors or affiliates that would require disclosure under the rules and
regulations of the SEC applicable to the offer.
FEES AND EXPENSES
We have retained Innisfree M&A Incorporated to act as the information agent
in connection with our offer. The information agent may contact holders of
Cyprus Amax shares by mail, telephone, telex, telegraph and personal interviews
and may request brokers, dealers and other nominee stockholders to forward our
offer materials to beneficial owners of Cyprus Amax shares. The information
agent will be paid a customary fee for such services, plus reimbursement of
out-of-pocket expenses, and we will indemnify the information agent against
certain liabilities and expenses in connection with our offer, including
liabilities under federal securities laws.
Pursuant to a letter agreement dated August 16, 1999 (the "Letter
Agreement"), Morgan Stanley & Co. Incorporated ("Morgan Stanley") is providing
certain financial advisory services to Phelps Dodge in connection with our
offer. Under the terms of the Letter Agreement, Phelps Dodge has agreed to pay
Morgan Stanley for its financial advisory services, including its services as
Dealer Manager, in connection with our offer a financial advisory fee of (i)
$11.0 million per acquired company if Phelps Dodge acquires control, as defined
in the Letter Agreement, of Asarco or Cyprus Amax, with certain amounts payable
upon the announcement of defined events, and (ii) an additional $2.0 million if
Phelps Dodge acquires either Asarco or Cyprus Amax within two years of acquiring
the other. Phelps Dodge has also agreed to reimburse Morgan Stanley for its
out-of-pocket expenses, including the fees and expenses of its legal counsel
incurred in connection with this engagement, and has agreed to indemnify each of
Morgan Stanley and certain related persons and entities against certain
liabilities and expenses in connection with Morgan Stanley's engagement,
including certain liabilities under federal securities laws.
In addition to the fees to be received by Morgan Stanley in connection with
its engagement as financial advisor to Phelps Dodge, Morgan Stanley has in the
past rendered various investment banking and financial advisory services for
Phelps Dodge for which it has received customary compensation.
We will not pay any fees or commissions to any broker, dealer or other
persons (other than the dealer manager and the information agent) for soliciting
tenders of Cyprus Amax shares pursuant to our offer.
ACCOUNTING TREATMENT
The merger of Cyprus Amax into Phelps Dodge would be accounted for under
the purchase method of accounting under U.S. generally accepted accounting
principles, which means that Cyprus Amax's results of operations will be
included with ours from the closing date and its consolidated assets and
liabilities will be recorded at their fair values at the same date.
STOCK EXCHANGE LISTINGS
Our common stock is listed on the NYSE, as well as on the Boston,
Cincinnati, Philadelphia, Pacific and Chicago Stock Exchanges. We will make an
application to list on the NYSE the common stock that we will issue pursuant to
our offer and the subsequent Phelps Dodge/Cyprus Amax merger. As described above
under "The Offer -- Conditions of Our Offer -- Phelps Dodge Stockholder Approval
Condition," pursuant to the rules of the NYSE, the issuance of our common stock
in the offer and the subsequent Phelps Dodge/Cyprus Amax merger must be approved
by the holders of Phelps Dodge common stock as a single class, voting at a
meeting at which the total number of votes cast represents over 50% in interest
of all shares of our common stock outstanding on the applicable record date.
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THE COMPANIES
PHELPS DODGE CORPORATION
Phelps Dodge Corporation is among the world's largest producers of copper,
carbon black and magnet wire, and is the world's largest producer of
continuous-cast copper rod. Phelps Dodge comprises two divisions: (i) Phelps
Dodge Mining Company and (ii) Phelps Dodge Industries.
- Phelps Dodge Mining Company is a business segment that includes our
worldwide copper operations from mining through rod production, marketing
and sales, other mining operations and investments, and worldwide mineral
exploration and development programs.
- Phelps Dodge Industries includes our specialty chemicals segment, our
wire and cable segment, and, until they were sold in 1998, our wheel and
rim operations.
In 1998, Phelps Dodge Mining Company produced 874,000 tons of copper for
our account from worldwide mining operations, and an additional 178,700 tons of
copper for the accounts of our minority interest partners. Gold, silver,
molybdenum, copper chemicals and sulfuric acid are by-products of our copper
operations. Production of copper for our own account from our U.S. operations
constituted approximately 33 percent of the copper mined in the United States in
1998. Much of our U.S. cathode copper production, together with additional
copper purchased from others, is used to produce continuous-cast copper rod, the
basic feed for the electrical wire and cable industry.
Our international mining interests include Candelaria, a major copper mine
in Chile, and other operations and investments in Chile and Peru. These
operations produce a variety of metals and minerals including copper, gold,
silver, and zinc. We also explore for metals and minerals throughout the world.
In addition to our mining interests, we produce engineered products
principally for the global energy, telecommunications, transportation and
specialty chemicals sectors through Phelps Dodge Industries. Specialty chemicals
are produced at Columbian Chemicals Company which is among the world's largest
producers of carbon black. Carbon black is a reinforcing agent in natural and
synthetic rubber that increases the service life of tires, hoses, belting and
other products for the rubber industry. We also produce specialty carbon black
for other industrial applications such as pigments for printing, coatings,
plastics and other non-rubber applications.
Our wire and cable segment comprises Phelps Dodge Magnet Wire Company and
its subsidiaries and Phelps Dodge International Corporation and its affiliates.
This segment produces wire and cable products and specialty conductors at U.S.
and international operations. Phelps Dodge Magnet Wire Company produces magnet
wire and other copper products for sale principally to original equipment
manufacturers for use in electrical motors, generators, transformers and other
products. Phelps Dodge International Corporation manufactures telecommunication
and energy cables and specialty conductors.
Our company employed 13,193 people on June 30, 1999.
We have our principal executive offices at 2600 North Central Avenue,
Phoenix, Arizona 85004-3014 (telephone number (602) 234-8100).
ASARCO INCORPORATED
Asarco, a New Jersey corporation organized in 1899, is one of the world's
leading producers of copper. Asarco also produces specialty chemicals and
aggregates. Asarco's copper business includes integrated mining, smelting and
refining operations in North America and in Peru through its 54.3% owned
subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly owned
subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing
industries. American Limestone Company, a wholly owned subsidiary, produces
construction aggregates, ready-mixed concrete and agricultural limestone. Asarco
also operates a custom lead smelting business, a silver mining business, a zinc
mining business and a specialty metals business. Asarco owns Encycle, Inc.,
48
<PAGE> 57
which operates a waste recycling facility and Hydrometrics, an environmental
consulting and construction firm. As of June 30, 1999, Asarco and its
subsidiaries employed approximately 10,100 employees.
Asarco has its principal executive offices at 180 Maiden Lane, New York,
New York 10038 (telephone number (212) 510-2000).
CYPRUS AMAX MINERALS COMPANY
Cyprus Amax, a Delaware corporation organized in 1969, is a major mining
company engaged, directly or through its subsidiaries and affiliates, in the
exploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of
molybdenum, and has a significant position in gold via its 30% interest in
Kinross Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal
operations in June of 1998 and sold its lithium business in October of 1998.
Cyprus Amax sold its remaining U.S. coal operations in June of 1999. Cyprus Amax
still holds its Australian coal properties. As of June 30, 1999, Cyprus Amax and
its subsidiaries employed approximately 4,600 employees.
Cyprus Amax has its principal executive offices at 9100 East Mineral
Circle, Englewood, Colorado 80112 (telephone number (212) 643-500).
49
<PAGE> 58
MARKET PRICES AND DIVIDENDS
The Phelps Dodge common shares are listed and principally traded on the
NYSE under the symbol "PD". The Asarco common shares are listed and principally
traded on the NYSE under the symbol "AR". The Cyprus Amax common shares are
listed and principally traded on the NYSE under the symbol "CYM". The following
table sets forth, for the periods indicated, (1) the high and low last reported
prices per Phelps Dodge share, Asarco share and Cyprus Amax share, in each case
as reported on the New York Stock Exchange Composite Transaction Tape; and (2)
the cash dividends per Phelps Dodge share, Asarco share and Cyprus Amax share.
<TABLE>
<CAPTION>
PHELPS DODGE COMMON STOCK ASARCO COMMON STOCK
---------------------------------- -----------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.............. $79 $68 $0.50 $32 1/2 $25 1/8 $0.20
Second Quarter............. 89 5/8 70 1/4 0.50 32 1/2 26 1/8 0.20
Third Quarter.............. 87 15/16 75 1/16 0.50 34 30 0.20
Fourth Quarter............. 79 13/16 59 7/8 0.50 31 7/8 21 3/4 0.20
1998
First Quarter.............. $69 1/4 $58 1/16 $0.50 $26 3/4 $20 1/2 $0.20
Second Quarter............. 71 3/4 56 1/8 0.50 27 13/16 21 3/8 0.20
Third Quarter.............. 62 9/16 43 7/8 0.50 24 15 7/16 0.20
Fourth Quarter............. 61 3/4 49 9/16 0.50 23 14 7/8 0.10
1999
First Quarter.............. $61 5/16 $41 7/8 $0.50 $18 3/8 $13 11/16 $0.05
Second Quarter............. 70 5/8 48 7/8 0.50 19 1/4 13 7/16 0.05
Third Quarter (through
August 24)............... 66 3/4 56 13/16 0.50 22 5/8 17 1/2 0.05
<CAPTION>
CYPRUS AMAX COMMON STOCK
-----------------------------------
HIGH LOW DIVIDEND
---- --- --------
<S> <C> <C> <C>
1997
First Quarter.............. $24 7/8 $21 1/4 $0.20
Second Quarter............. 26 3/8 21 5/8 0.20
Third Quarter.............. 26 13/16 22 3/8 0.20
Fourth Quarter............. 25 14 7/16 0.20
1998
First Quarter.............. $17 7/8 $14 $0.20
Second Quarter............. 17 7/8 13 0.20
Third Quarter.............. 13 13/16 9 3/16 0.20
Fourth Quarter............. 14 3/8 9 0.20
1999
First Quarter.............. $13 1/8 $ 9 3/8 $0.20
Second Quarter............. 16 1/16 11 3/8 0.05
Third Quarter (through
August 24)............... 17 13/16 12 7/8 0.05
</TABLE>
On August 19, 1999, the last full trading day before Phelps Dodge publicly
announced its proposal to combine with Asarco and Cyprus Amax, the last reported
closing prices per Phelps Dodge common share, Asarco common share and Cyprus
Amax common share were $58 9/16, $18 7/16 and $14 1/2, respectively. On August
25, 1999, the most recent practicable date prior to the filing of this
prospectus, the last reported closing prices per Phelps Dodge common share,
Asarco common share and Cyprus Amax common share were $57 5/8, $21 7/16 and
$17 3/16, respectively. We urge you to obtain current market quotations before
making any decision with respect to our offer.
50
<PAGE> 59
PHELPS DODGE CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Phelps Dodge for each of the years in the five-year period ended December 31,
1998 and the six-month periods ended June 30, 1999 and 1998. This information is
derived from the selected audited financial data of Phelps Dodge contained in
Phelps Dodge's Annual Report on Form 10-K for the year ended December 31, 1998
and from the unaudited financial statements of Phelps Dodge contained in Phelps
Dodge's Quarterly Report on Form 10-Q for the period ended June 30, 1999, which
are incorporated by reference herein, and from Phelps Dodge's Quarterly Report
on Form 10-Q for the period ended June 30, 1998. See "Where You Can Find More
Information" on page v. You should read this summary together with these
financial statements and their accompanying notes.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales........................ $1,354 $1,593 $3,063 $3,914 $3,787 $4,185 $3,289
Operating income (loss)...... (27)(a) 348(b) 423(c) 611(d) 713(e) 1,101(f) 400(g)
Earnings (loss) before
minority interests......... (61) 208 199 414 478 760 279
Minority interests........... -- (4) (8) (5) (16) (13) (8)
Net earnings (loss).......... (61) 204 191 409 462 747 271
Net earnings (loss) per
Common Share:
-- Basic................... $(1.04) $ 3.49 $ 3.28 $ 6.68 $ 7.02 $10.72 $ 3.84
-- Diluted................. $(1.04) $ 3.48 $ 3.26 $ 6.63 $ 6.98 $10.66 $ 3.82
Cash dividend per Common
Share...................... $ 1.00 $ 1.00 $ 2.00 $ 2.00 $ 1.95 $ 1.80 $ 1.69
BALANCE SHEET DATA
Cash and marketable
securities................. $ 144 $ 336 $ 222 $ 158 $ 470 $ 609 $ 287
Working capital.............. 196 516 329 350 736 950 558
Total assets................. 4,902 5,061 5,037 4,965 4,816 4,646 4,134
Stockholder's Equity......... 2,373 2,621 2,587 2,510 2,756 2,678 2,188
OTHER FINANCIAL DATA
Book value per common
share...................... $40.91 $44.68 $44.66 $42.81 $42.59 $39.04 $30.95
Debt as a % of
capitalization(h).......... 30.5% 26.6% 27.6% 27.7% 18.8% 20.2% 23.6%
Cash provided from operating
activities................. $ 46 $ 109 $ 378 $ 765 $ 838 $ 959 $ 543
</TABLE>
- ---------------
(a) Includes non-recurring restructuring charges of $83.0.
(b) Includes before-tax gain of $186.1 from the disposition of a 90 percent
interest in Accuride Corporation.
(c) Includes before-tax gain of $198.7 from the disposition of the 100 percent
interest in Accuride Corporation and a non-recurring, before-tax provision
of $7.8 for curtailments and indefinite closures primarily at Phelps Dodge
Mining Company.
(d) Includes $45.9 charge primarily for additional provisions of $23.0 for
estimated future costs associated with environmental matters and $19.1 for a
voluntary early retirement program.
(e) Includes reclamation reserves of $10.0 for the court-ordered rescission of a
1986 sale of property in Maspeth, New York, by the Corporation to the United
States Postal Service.
(f) Includes before-tax gain of $26.8 from the disposition of a Phelps Dodge
Industries' operating facility.
(g) Includes $98.7 charge for environmental costs and a before-tax loss of $59.0
for the disposition of certain operating facilities and mining properties.
(h) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
51
<PAGE> 60
ASARCO INCORPORATED
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Asarco for each of the years in the five-year period ended December 31, 1998 and
the six-month periods ended June 30, 1999 and 1998. This information is derived
from the Form S-4 Registration Statement filed by Asarco Cyprus Incorporated in
connection with the proposed Asarco-Cyprus Amax merger. This information is only
a summary and should be read together with the financial statements and
accompanying notes contained in Asarco's Annual Report on Form 10-K for the year
ended December 31, 1998, Asarco's Quarterly Report on Form 10-Q for the period
ended June 30, 1999 and Asarco's Quarterly Report on Form 10-Q for the period
ended June 30, 1998. See "Where You Can Find More Information" on page v.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995(F) 1994
------ ------ ------ ------ ------ ------- ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales............................... $ 966 $1,186 $2,233 $2,721 $2,717 $3,198 $2,032
Operating income (loss)............. (49) (33) (118)(a) 275(b) 303(d) 487(g) 18(h)
Earnings (loss) before minority
interests......................... (52) (31) (104) 234 226 299 65
Minority interests.................. (4) (15) (27) (91) (88) (130) (1)
Net earnings (loss)................. (56) (46) (131) 143(c) 138(e) 169 64(i)
Earnings (loss) per Common Share:
Net earnings (loss) --
Basic............................. $(1.42) $(1.17) $(3.29) $ 3.42 $ 3.24 $ 4.00 $ 1.53
Net earnings (loss) --
Diluted........................... $(1.42) $(1.17) $(3.29) $ 3.42 $ 3.23 $ 3.98 $ 1.52
Cash Dividend per Common Share...... $ 0.10 $ 0.40 $ 0.70 $ 0.80 $ 0.80 $ 0.70 $ 0.40
BALANCE SHEET DATA
Cash and marketable securities...... $ 156 $ 285 $ 216 $ 416 $ 193 $ 281 $ 18
Working capital..................... 335 502 502 726 511 565 282
Total assets........................ 3,977 4,020 4,024 4,110 4,120 4,327 3,291
Inventories -- replacement cost in
excess of LIFO inventory costs.... 80 78 74 86 115 137 143
Stockholders' Equity................ 1,459 1,623 1,525 1,694 1,737 1,707 1,517
OTHER FINANCIAL DATA
Book value per common share......... $36.68 $40.92 $38.45 $42.71 $40.56 $40.11 $36.04
Debt as a % of capitalization(j).... 34.8% 30.0% 33.7% 28.3% 26.7% 34.1% 38.1%
Debt as a % of capitalization, net
of excess cash(j)................. 32.4% 24.3% 30.0% 20.2% 24.1% 32.1% 38.1%
Cash provided from (used for)
operating activities.............. $ 74 $ 65 $ 62 $ 321 $ 267 $ 489 $ (10)
</TABLE>
- ------------
(a) Includes charges of $20.0 to reflect the effect of the sale of Asarco's
Missouri Lead Division and $10.0 related to Southern Peru Copper
Corporation's $30.0 cost reduction program. Includes charges of $9.5 for the
three year suspension of operations at Asarco's copper smelter in El Paso,
Texas, $9.8 to write down the book value and provide for the closure costs
of Asarco's Black Cloud lead-zinc mine in Leadville, Colorado, $10.9 for the
transfer of Southern Peru Copper Corporation's ownership of the Ilo townsite
to its worker occupants and the city of Ilo, Peru and $7.7 to increase
reserves for certain employee benefit plans and for severance and other
costs related to Asarco's cost reduction program. Includes a charge of $33.2
($54 in charges offset by $20.8 in anticipated insurance and other
recoveries) to increase reserves for closed plants and environmental
matters.
(b) Environmental charges of $22.1 in 1997, include charges of $30.0 offset
entirely by anticipated insurance recoveries.
(c) Includes a $47.6 after-tax gain ($73.3 pre-tax) from the sale of shares of
Grupo Mexico, S.A. de C.V.
(footnotes continued on next page)
52
<PAGE> 61
(d) Includes a $15.0 charge ($67.7 in charges offset by $52.7 in insurance
settlements and other recoveries) for closed plant and environmental
matters.
(e) Includes a $39.0 after-tax gain ($60.1 pre-tax) from the sale of Asarco's
remaining interest in MIM and a $7.2 after-tax gain ($11.1 pre-tax) from the
sale of a 25% interest in Asarco's Silver Bell project.
(f) On April 5, 1995, ASARCO acquired an additional 10.7% interest in Southern
Peru Copper Corporation for $116.4 increasing its ownership from 52.3% to
63%. The additional shares acquired enabled Asarco to elect a majority of
the directors of Southern Peru Copper Corporation. As a result, Asarco has
consolidated Southern Peru Copper Corporation in its financial statements
based on its 52.3% ownership, effective January 1, 1995, and 63% ownership,
effective April 5, 1995. Asarco previously accounted for its investment in
Southern Peru Copper Corporation by the equity method. As of June 30, 1999,
Asarco's ownership interest in Southern Peru Copper Corporation was 54.3%.
(g) Includes a $139.4 charge to add to Asarco's reserve for closed plant and
environmental matters, to provide for asset impairments and plant closures
and to write down certain in-process inventory to net realizable value.
(h) Includes a $65.5 pre-tax charge to add to Asarco's reserve for closed plant
and environmental matters.
(i) Includes a $31.9 after-tax gain ($58.5 pre-tax) from the sale of Asarco's
remaining interest in Asarco Australia Limited.
(j) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
53
<PAGE> 62
CYPRUS AMAX MINERALS COMPANY
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Cyprus Amax for each of the years in the five-year period ended December 31,
1998 and the six-month periods ended June 30, 1999 and 1998. This information is
derived from the Form S-4 Registration Statement filed by Asarco Cyprus
Incorporated in connection with the proposed Asarco-Cyprus Amax merger. This
information is only a summary and should be read together with the financial
statements and accompanying notes contained in Cyprus Amax's Annual Report on
Form 10-K for the year ended December 31, 1998, Cyprus Amax's Quarterly Report
on Form 10-Q for the period ended June 30, 1999 and Cyprus Amax's Quarterly
Report on Form 10-Q for the period ended June 30, 1998. See "Where You Can Find
More Information" on page v.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(a)
Revenue.............................. $ 561 $ 870 $1,661 $1,978 $1,584 $1,908 $1,540
Operating income (loss).............. (13) 18 52 249 63 485 202
Income (loss) from Continuing
Operations(b)...................... (77) (53) (134) 89 15 367 104
Net Income (loss)(c)................. (74) (32) (75) 69 77 124 175
Earnings (loss) per Common Share:
Income (loss) from Continuing
Operations(b).................... $(0.95) $(0.67) $(1.65) $ 0.76 $(0.04) $ 3.75 $ 0.92
Net earnings (loss)(c)............. $(0.92) $(0.44) $(1.02) $ .54 $ 0.62 $ 1.13 $ 1.69
Cash Dividend per Common Share....... $ 0.25 $ 0.40 $ 0.80 $ 0.80 $ 0.80 $ 0.80 $ 0.90
BALANCE SHEET DATA
Cash and Cash Equivalents............ $1,275 $ 180 $ 353 $ 250 $ 193 $ 191 $ 139
Working capital...................... 970 232 250 297 304 292 423
Total assets......................... 4,746 5,441 5,341 6,459 6,786 6,196 5,407
Long-Term Debt and Capital Lease
Obligations........................ 1,525 1,791 1,718 2,202 2,554 1,877 1,391
Stockholders' Equity................. 2,059 2,264 2,157 2,330 2,360 2,365 2,329
OTHER FINANCIAL DATA
Book Value Per Common Share.......... $20.17 $22.21 $21.32 $22.99 $23.43 $23.62 $23.39
Long-Term Debt/Total
Capitalization(d).................. 42.3% 43.8% 43.9% 46.9% 50.4% 42.6% 37.4%
Net Long-Term Debt/Total
Capitalization(d)(e)............... 10.7% 41.2% 38.4% 44.0% 48.4% 40.0% 34.9%
Cash Provided by Operating
Activities......................... $ 47 $ 129 $ 237 $ 481 $ 440 $ 675 $ 110
</TABLE>
- ---------------
(a) The Cyprus Amax historical consolidated income statement data has been
restated to reflect the Domestic Coal Division as a Discontinued Operation
due to its sale effective June 30, 1999.
(b) Income (loss) from Continuing Operations reflects net after-tax copper
charges of $94 for environmental remediation liabilities and write-downs,
net after-tax gains of $123 from the sale of the lithium business, an
Oakbridge coal mine in Australia, and real estate, a net after-tax charge of
$22 for legal settlements, a net after-tax charge of $37 for Cyprus Amax's
share of the Kinross asset impairment and the sale by Kinross of the
pre-merger Amax Gold hedging portfolio, and an after-tax charge of $4 for
various special items in 1998; an after-tax charge of $13 for the write-
down of Oakbridge's Clarence mine in Australia, favorable tax adjustments of
$38, an after-tax gain of $19 on the sale of Kubaka to Amax Gold, and an
after-tax charge of $5 for the costs of redeeming the 9 7/8% Notes in 1997;
an after-tax charge of $74 for environmental remediation liabilities, costs
to temporarily close a copper mine, the write-down of the net assets of the
Guanaco gold mine, and an unrelated favorable tax adjustment for Amax Gold
in 1996; an after-tax charge of $4 to write-down assets of an Oakbridge mine
in Australia in 1995; and an after-tax gain of $21 for various special items
in 1994.
(c) Discontinued Operations for the six months ended June 30, 1999 included
earnings from the domestic coal business of $16 after-tax and a $13
after-tax loss on the sale of the coal assets. In addition, for the six
months ended June 30, 1998 and for the years 1994 through 1998, the results
have been restated to reflect the Domestic Coal Division as a discontinued
operation. Discontinued
(footnotes continued on next page)
54
<PAGE> 63
Operations included for the six months ended 1998 after-tax earnings of $21;
after-tax earnings of $59 that reflects a loss on the sale of certain
eastern and midwestern coal properties of $12 and favorable legal
settlements of $5 for 1998; after-tax loss of $20 that reflects charges of
$66 for write-downs for 1997; after-tax earnings of $62 for 1996; after-tax
loss of $243 that reflects a charge of $334 for the write-down of certain
coal assets and provisions for associated liabilities for 1995; and
after-tax earnings of $62 that reflects a write-down of $8 for the Orchard
Valley mine for 1994. Also in 1994 Discontinued Operations included income
from the Oil and Gas business for the first quarter of 1994 of $7 after-tax
and a $2 after-tax gain on the sale of Cyprus Amax-owned oil and gas assets.
(d) Total Capitalization includes Debt, Minority Interest and Stockholders'
Equity.
(e) Net Long-Term Debt includes Long-term debt less Cash and Cash Equivalents.
55
<PAGE> 64
PHELPS DODGE
COMPARATIVE PER SHARE INFORMATION
The following table presents historical per common share information for
Phelps Dodge and Cyprus Amax, and the pro forma and equivalent pro forma per
common share data giving effect to the combination of Phelps Dodge and Cyprus
Amax and Phelps Dodge, Cyprus Amax and Asarco, for the six months ended June 30,
1999 and the year ended December 31, 1998. The pro forma combined per share
information does not purport to represent what the combined financial position
or results of operations would actually have been if the combinations had
occurred at January 1, 1998, nor are they necessarily indicative of Phelps
Dodge's future consolidated results of operations or financial position. The
information tabled below should be read in conjunction with the historical
financial statements of the combining corporations and the "Selected Historical
Financial Data" of Phelps Dodge, Asarco and Cyprus Amax on pages 51 through 55,
and the "Unaudited Pro Forma Combined Financial Information" on page 58.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Per common share
Historical:
Phelps Dodge
Book value(1)..................................... $40.91 $44.68
Net income(loss)
Basic.......................................... (0.98) 3.28
Diluted........................................ (0.98) 3.26
Cash dividends.................................... 1.00 2.00
Cyprus Amax
Book value(1)..................................... 20.17 21.32
Net income(loss)
Basic.......................................... (0.95) (1.65)
Diluted........................................ (0.95) (1.65)
Cash dividends.................................... 0.25 0.80
Pro forma:
Combined Phelps Dodge and Cyprus Amax
Book value(1)..................................... 46.74 50.45
Income(loss) from continuing operations--Basic and
Diluted........................................ (1.62) 0.24
Cash dividends(2)................................. 1.00 2.00
Cyprus Amax Equivalent(3)
Book value(1)..................................... 14.65 15.82
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.51) 0.08
Cash dividends.................................... 0.31 0.63
Combined Phelps Dodge, Asarco and Cyprus Amax
Book value(1)..................................... 49.95 53.72
Income(loss) from continuing operations--Basic and
Diluted........................................ (1.67) (0.57)
Cash dividends(2)................................. 1.00 2.00
</TABLE>
(footnotes on next page)
56
<PAGE> 65
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Asarco Equivalent(3)
Book value(1)..................................... 20.47 22.01
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.68) (0.23)
Cash dividends.................................... 0.41 0.62
Cyprus Amax Equivalent(3)
Book value(1)..................................... 15.66 16.84
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.52) (0.18)
Cash dividends.................................... 0.31 0.63
</TABLE>
- ---------------
(1) Book value per share is determined as at June 30, 1999 and December 31,
1998.
(2) Pro forma combined cash dividends per share of Phelps Dodge common stock
reflect Phelps Dodge's historical dividend rate per share declared in the
periods presented.
(3) Pro forma combined equivalent per share of Asarco and Cyprus Amax common
stocks reflects the pro forma combined per share of Phelps Dodge's common
stock amount multiplied by the exchange ratio of 0.4098 and 0.3135 of Phelps
Dodge stock for each share of Asarco and Cyprus Amax respectively.
57
<PAGE> 66
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Financial Information of Phelps Dodge
Corporation (Phelps Dodge) presented following is derived from the historical
consolidated financial statements of Phelps Dodge, ASARCO Incorporated (Asarco)
and Cyprus Amax Minerals Company (Cyprus Amax). The Unaudited Pro Forma Combined
Financial Information is presented under two separate scenarios (collectively
the "Transactions"): (i) the acquisition by Phelps Dodge of Cyprus Amax; and
(ii) the acquisition by Phelps Dodge of Asarco and Cyprus Amax. The acquisitions
of Asarco and Cyprus Amax are not dependent upon each other. Under each of the
scenarios, the Unaudited Pro Forma Combined Financial Information is prepared
using the purchase method of accounting, with Phelps Dodge treated as the
acquirer and as if the transactions had been completed as of January 1, 1998,
for statement of operations purposes and on June 30, 1999, for balance sheet
purposes.
For a summary of the proposed business combinations, see "The Offer"
beginning on page 32 of this prospectus.
The Unaudited Pro Forma Combined Financial Information is based upon the
historical financial statements of Phelps Dodge, Asarco and Cyprus Amax adjusted
to give effect to the proposed business combinations. The pro forma assumptions
and adjustments for each transaction scenario are described in the accompanying
notes presented on the following pages. The assumptions and related pro forma
adjustments have been developed from information available to Phelps Dodge from
the December 31, 1998, Form 10-K filings and June 30, 1999, Form 10-Q filings of
Asarco and Cyprus Amax and the Form 8-K filing dated June 30, 1999, of Cyprus
Amax. Such pro forma adjustments have been included only to the extent known and
reasonably available to Phelps Dodge.
Phelps Dodge also has reviewed the Form S-4 Registration Statement of
Asarco Cyprus Incorporated filed on August 20, 1999, in connection with the
proposed merger of Asarco and Cyprus Amax. Their filing included unaudited pro
forma combined financial information for Asarco and Cyprus Amax as if the merger
had occurred at specific assumed dates. Certain pro forma adjustments that
Phelps Dodge noted in reviewing this unaudited pro forma combined financial
information have not been incorporated in the accompanying Unaudited Pro Forma
Combined Financial Information because information necessary to make or assess
such adjustments is not available to Phelps Dodge.
As a consequence of the nature of the Transactions, there may be, and
likely will be, actions and other events or changes initiated by Asarco and/or
Cyprus Amax that would significantly change purchase prices and purchase price
allocations. Also, Phelps Dodge has not had access to additional proprietary and
confidential corporate financial and other information of Asarco and Cyprus Amax
and has not had an opportunity to undertake any due diligence procedures. Such
information and procedures may provide Phelps Dodge with additional information
that could materially affect the purchase price paid for the acquisition of
Asarco or Cyprus Amax, the purchase price allocation and, accordingly, the
assumptions and pro forma adjustments. Identified factors which may have a
significant impact on the basis and results of the combinations are described in
Note 2 of the accompanying notes to the Unaudited Pro Forma Combined Balance
Sheet and Combined Statements of Operations for each scenario.
Furthermore, the ultimate determination of the purchase price paid for the
acquisition of Cyprus Amax and Asarco may change significantly from the current
estimate. For the purpose of this Unaudited Pro Forma Combined Financial
Information, the purchase price has been estimated based upon the market price
of $58.6875 for each Phelps Dodge common share, that being the last quoted price
at the moment Asarco and Cyprus Amax trading was halted on August 20, 1999. The
final purchase price will be based largely upon the average market price of
Phelps Dodge common stock at the earlier of the dates the combinations are
announced or consummated between Phelps Dodge, Asarco and Cyprus Amax. As a
result of these uncertainties, the final determination and allocation of
purchase price may differ from the amounts assumed in this Unaudited Pro Forma
Combined Financial Information and those differences may be material.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial
58
<PAGE> 67
positions of Phelps Dodge would have been had the acquisitions of Asarco and/or
Cyprus Amax occurred on the respective dates assumed, nor is it necessarily
indicative of future consolidated operating results or financial position.
The Unaudited Pro Forma Combined Financial Information does not include the
realization of cost savings from operating efficiencies, synergies or other
restructurings resulting from the Transactions and does not contemplate the
liabilities that may be incurred in any related restructurings. Phelps Dodge
estimated consolidated annual cash cost savings of at least $200 million as a
result of synergies, reduced overhead costs and other actions resulting from the
combination of all three companies. Phelps Dodge believes that the Transactions
and the resulting activities would yield substantial cash cost savings of at
least $75 million beyond those that can be realized by Asarco Cyprus
Incorporated which were estimated to be $125 million in the Form S-4
Registration Statement of Asarco Cyprus Incorporated filed on August 20, 1999.
There is no assurance that these cost savings can or will be realized.
This Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the separate historical consolidated financial statements and
accompanying notes of Phelps Dodge, Asarco and Cyprus Amax that are incorporated
by reference in this Registration Statement. You should not rely on the
Unaudited Pro Forma Combined Financial Information as an indication of the
consolidated results of operations or financial position that would have been
achieved if the business combinations had taken place earlier or of the
consolidated results of operations or financial position of Phelps Dodge after
the completion of such transactions.
59
<PAGE> 68
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues....................... $1,354 966 561 -- 2,881
------ ----- --- ------ -----
Operating costs and expenses
Cost of products sold.......... 1,073 855 428 -- 2,356
Depreciation, depletion and
amortization................ 144 73 104 (41)(H) 280
Selling and general
administrative expense...... 60 72 34 -- 166
Exploration and research
expense..................... 21 11 8 -- 40
Non-recurring charges and
provision for asset
dispositions*............... 83 4 -- -- 87
------ ----- --- ------ -----
1,381 1,015 574 (41) 2,929
------ ----- --- ------ -----
Operating income (loss).......... (27) (49) (13) 41 (48)
Interest expense............... (48) (38) (69) (9)(D)
(4)(A)
(3)(J) (171)
Capitalized interest........... -- -- 2 4(A) 6
Miscellaneous income and
expense, net................ (7) 10 (11) (1)(I)
6(A) (3)
------ ----- --- ------ -----
Income (loss) before taxes,
minority interests and equity
in net earnings of affiliated
companies...................... (82) (77) (91) 34 (216)
Provision for taxes on
income...................... 19 25 14 (1)(A)
(10)(E) 47
Minority interests in
consolidated subsidiaries... 1 (4) -- 1(I) (2)
Equity in net earnings (losses)
of affiliated companies..... 5 -- -- (5)(A) --
------ ----- --- ------ -----
Income (loss) from continuing
operations..................... (57) (56) (77) 19 (171)
Preferred stock dividends...... -- -- (9) 9(D) --
------ ----- --- ------ -----
Income (loss) from continuing
operations applicable to common
shares......................... $ (57) (56) (86) 28 (171)
====== ===== === ====== =====
Net earnings (loss) per
share -- basic
Basic.......................... $(0.98) (1.67)
Diluted........................ $(0.98) (1.67)
Weighted average shares
outstanding
Basic.......................... 57.8 102.5
Diluted........................ 57.8 102.5
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
Registration Statement for a description of non-recurring charges and
provision for asset dispositions.
60
<PAGE> 69
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues......................... $3,064 2,233 1,660 (218)(A) 6,739
------ ----- ----- ------- ------
Operating costs and expenses
Cost of products sold............ 2,361 1,963 1,087 (200)(A) 5,211
Depreciation, depletion and
amortization................... 293 145 254 (7)(A)
(80)(H) 605
Selling and general
administrative expense......... 123 144 105 -- 372
Exploration and research
expense........................ 55 27 45 -- 127
Non-recurring charges and
provision for asset
dispositions*.................. (191) 72 118 -- (1)
------ ----- ----- ------- ------
2,641 2,351 1,609 (287) 6,314
------ ----- ----- ------- ------
Operating income (loss)............ 423 (118) 51 69 425
Interest expense................. (97) (68) (157) (19)(D)
(13)(A)
(5)(J) (359)
Capitalized interest............. 2 -- 2 13(A) 17
Miscellaneous income and expense,
net............................ 9 29 17 (6)(I)
(4)(A) 45
------ ----- ----- ------- ------
Income (loss) before taxes,
minority interests and equity in
net earnings of affiliated
companies........................ 337 (157) (87) 35 128
Provision for taxes on income.... (134) 53 (11) (16)(E) (108)
Minority interests in
consolidated subsidiaries...... (8) (27) 1 8(I) (26)
Equity in net earnings (losses)
of affiliated companies........ (4) -- (53) 4(A) (53)
------ ----- ----- ------- ------
Income (loss) from continuing
operations....................... 191 (131) (150) 31 (59)
Preferred stock dividends........ -- -- (19) 19(D) --
------ ----- ----- ------- ------
Income (loss) from continuing
operations applicable to common
shares........................... $ 191 (131) (169) 50 $ (59)
====== ===== ===== ======= ======
Net earnings (loss) per
share -- basic
Basic............................ $ 3.28 (0.57)
Diluted.......................... $ 3.26 (0.57)
Weighted average shares outstanding
Basic............................ 58.2 102.9
Diluted.......................... 58.5 103.2
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
Registration Statement for a description of non-recurring charges and
provision for asset dispositions.
61
<PAGE> 70
PHELPS DODGE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents....... $ 144 125 1,275 (30)(B)
(5)(D) 1,509
Accounts receivable, net........ 396 404 37 -- 837
Inventories..................... 263 305 239 (127)(A)
84(C) 764
Supplies........................ 104 -- 55 127(A) 286
Prepaid expenses and other
assets........................ 15 135 74 5(C)
(33)(A) 196
Deferred income taxes........... 45 -- 32 33(A) 110
------ ----- ----- ------ ------
Current assets................ 967 969 1,712 54 3,702
Investments and long-term
accounts receivable........... 95 190 328 29(C)
(13)(I)
9(A) 638
Property, plant and equipment,
net........................... 3,501 2,592 2,546 (1,037)(C) 7,602
Other assets and deferred
charges....................... 339 226 160 (9)(A)
5(D) 721
------ ----- ----- ------ ------
Total Assets............. $4,902 3,977 4,746 (962) 12,663
====== ===== ===== ====== ======
LIABILITIES
Short-term debt................. $ 214 16 249 -- 479
Current portion of long-term
debt.......................... 62 31 79 -- 172
Accounts payable and accrued
expenses...................... 456 496 324 -- 1,276
Dividends payable............... 29 -- 9 -- 38
Accrued income taxes............ 11 90 81 -- 182
------ ----- ----- ------ ------
Current liabilities........... 772 633 742 -- 2,147
Long-term debt.................. 801 1,017 1,499 244(D)
(95)(C) 3,466
Deferred income taxes........... 493 28 14 (253)(E) 282
Other liabilities and deferred
credits....................... 376 306 412 52(C) 1,146
------ ----- ----- ------ ------
2,442 1,984 2,667 (52) 7,041
------ ----- ----- ------ ------
Minority interests in consolidated
subsidiaries.................... 86 534 20 (147)(I) 493
------ ----- ----- ------ ------
Common shareholders' equity
Common shares................... 362 525 1 (526)(G)
279(F) 641
Treasury shares................. -- -- (86) 86(A) --
Preferred shares................ -- -- 5 (5)(D) --
Capital in excess of par
value......................... 5 -- 2,912 (86)(A)
(2,826)(G)
2,342(F) 2,347
Retained earnings............... 2,198 949 (768) 134(I)
(181)(G) 2,332
Accumulated other comprehensive
income (loss)................. (183) (15) (5) 20(G) (183)
Other........................... (8) -- -- -- (8)
------ ----- ----- ------ ------
Total Shareholders'
Equity................. 2,374 1,459 2,059 (763) 5,129
------ ----- ----- ------ ------
Total Liabilities and
Shareholders' Equity... $4,902 3,977 4,746 (962) 12,663
====== ===== ===== ====== ======
</TABLE>
62
<PAGE> 71
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information has been derived
from historical consolidated financial statements of Phelps Dodge, Asarco and
Cyprus Amax incorporated by reference into this Registration Statement. See
Phelps Dodge "Unaudited Pro Forma Combined Financial Information" on page 58 of
this prospectus.
The assumptions and related pro forma adjustments described below have been
developed from public historical information available to Phelps Dodge. Pro
forma adjustments have been included only to the extent known and reasonably
available to Phelps Dodge. Additional information may exist that could
materially affect the assumptions and related pro forma adjustments. Such
information is not available to Phelps Dodge because it is within the particular
and singular knowledge of Asarco and Cyprus Amax.
2. THE OFFER
Phelps Dodge is proposing a three-way business combination of Phelps Dodge,
Asarco and Cyprus Amax through separate offerings to exchange all the issued and
outstanding Asarco and Cyprus Amax common shares for Phelps Dodge common shares,
see "The Offer" on page 32 of this prospectus.
Phelps Dodge proposes to exchange all the issued and outstanding Asarco and
Cyprus Amax common shares for Phelps Dodge common shares at an exchange ratio of
0.4098 Phelps Dodge common share for each Asarco common share and an exchange
ratio of 0.3135 Phelps Dodge common share for each Cyprus Amax common share.
The transactions would be accounted for under the purchase method. The
purchase price for the business combinations is estimated as follows (dollars in
millions and shares in thousands except per share data):
<TABLE>
<CAPTION>
ASARCO CYPRUS AMAX COMBINED
------ ----------- --------
<S> <C> <C> <C>
Common shares outstanding (as reported in June 30, 1999,
Form 10-Qs)............................................ 39,783 90,454
Exchange offer ratio of Phelps Dodge common shares for
each common share...................................... 0.4098 0.3135
Phelps Dodge common shares to be issued.................. 16,303 28,357 44,660
Market price of each Phelps Dodge common share on August
20, 1999, prior to trading halt........................ $58.6875
========
Fair value of Phelps Dodge common shares issued,
comprising par value of $279 ($6.25 per share) and
capital in excess of par of $2,342..................... $ 2,621
Redemption of Cyprus Amax Series A Preferred Stock (Note
3D).................................................... 244
Estimated transaction costs.............................. 30
--------
Purchase price........................................... $ 2,895
========
</TABLE>
The final purchase price could change materially from the purchase price
estimated above as a result of changes in the market price of common shares of
Phelps Dodge and/or the relative market price of Asarco and Cyprus Amax common
shares. There are arrangements in place at Asarco and Cyprus Amax that could
impact the purchase price including employment agreements, change of control
agreements, severance agreements, restricted stock awards, stock appreciation
rights, and certain pension and other employee benefit plans. In addition,
actions may be taken by the management of Asarco and Cyprus Amax, in a defensive
posture or for other reasons, that could impact the purchase price including
amending existing agreements or
63
<PAGE> 72
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
issuing stock options and other similar bonus awards. The potential impact of
these factors cannot be estimated but could be material.
The estimated purchase price does not give effect to outstanding stock
options which could impact the number of Phelps Dodge shares issued and/or the
purchase price either by their exercise or their conversion to outstanding stock
options of Phelps Dodge. Such effects prior to completion of the business
combination cannot be reasonably estimated from available public information. As
reported in their December 31, 1998, Form 10-Ks, Asarco and Cyprus Amax had
1,721,249 and 6,346,801 stock options outstanding, respectively. Cyprus Amax had
2,024,009 outstanding stock options with weighted average exercise prices less
than the per share equivalent value of Cyprus Amax common stock as determined by
the terms of the exchange offer. Asarco's stock options had an average exercise
price of $26.12, more than the per share equivalent value of Asarco's common
stock as determined by the exchange offer. If Cyprus Amax's 2,024,009 stock
options and all of Asarco's outstanding stock options were exercised prior to
consummation of the business combinations, the estimated purchase price would be
increased by approximately $78 million which would be substantially offset by
cash and cash equivalents received as proceeds from such exercises. Although it
is Phelps Dodge's desire that all outstanding Asarco and Cyprus Amax stock
options be converted to Phelps Dodge stock options at the respective offering
exchange ratio, it is not assured whether such conversions can be achieved in
whole or in part nor, consequently, the potential effect on the purchase price.
The estimated purchase price does not include any effect of Cyprus Amax's
outstanding preferred share purchase rights or Asarco's Shareholder Rights Plan.
As described in its December 31, 1998, Form 10-K, Cyprus Amax issued in February
1999 one preferred purchase right for each share of common stock which confers
certain rights to the holder including certain rights in the event of an
acquisition of 15% or more of Cyprus Amax's common stock. As described in
Asarco's December 31, 1998, Form 10-K, Asarco adopted a new Shareholder Rights
Plan in January 1998 that provides certain common stock purchase rights if a
person or group becomes the beneficial owner of 15% or more of Asarco's common
stock, with certain exceptions.
The final determination of the purchase price may differ from the amount
assumed in the Unaudited Pro Forma Combined Financial Information and that
difference may be material.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The following assumptions and related pro forma adjustments give effect to
the proposed business combinations of Phelps Dodge, Asarco and Cyprus Amax as if
such combinations occurred on January 1, 1998, in the Unaudited Pro Forma
Combined Statements of Operations for the six-month interim period ended June
30, 1999, and for the year ended December 31, 1998, respectively, and on June
30, 1999, for the Unaudited Pro Forma Combined Balance Sheet.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the business combinations with Asarco and
Cyprus Amax occurred on the respective dates assumed, nor is it necessarily
indicative of future consolidated operating results or financial position.
Future cash cost savings, which Phelps Dodge estimated will be at least
$200 million annually, are not recognized in this Unaudited Pro Forma Combined
Financial Information. Non-recurring items related to 1998 and the six-month
interim period ended June 30, 1999, are included (see "Selected Historical
Financial Data" at pages 51 through 55 for a summary of non-recurring items and
special charges) and
(A) Reclassifications have been made to the Asarco and Cyprus Amax
historical consolidated financial information to conform to Phelps Dodge's
presentation. The historical financial information of Cyprus Amax excludes
the results of operations and assets of its discontinued Coal segment as
reported
64
<PAGE> 73
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
for 1998 operations in Cyprus Amax's Form 8-K dated June 30, 1999, and as
reported as of and for the six months ended June 30, 1999, in its Form 10-Q
filing for such period. Cyprus Amax's historical financial information for
the year ended December 31, 1998, also has been adjusted to exclude the
identifiable results of recurring operations of its Lithium segment which
was sold in October 1998.
<TABLE>
<CAPTION>
BALANCE SHEET SIX MONTHS YEAR ENDED
AT JUNE 30, ENDED JUNE 30, DECEMBER 31,
(IN $ MILLIONS): 1999 1999 1998
- ---------------------------------- ------------- -------------- ------------
<S> <C> <C> <C>
Asarco reclassification
adjustments:
Inventories..................... (127)
Supplies........................ 127
Deferred income taxes (current
asset)....................... 33
Prepaid expenses and other
assets....................... (33)
Miscellaneous income and
expense, net................. (2) (4)
Equity in net earnings of
affiliated companies......... 2 4
Interest expense................ 4 13
Capitalized interest............ (4) (13)
Cyprus Amax reclassification
adjustments:
Investments and notes
receivable................... 9
Other assets and deferred
charges...................... (9)
Treasury shares................. 86
Capital in excess of par
value........................ (86)
Miscellaneous income and
expense, net................. 8
Provision for taxes on income... (1)
Equity in net earnings (losses)
of affiliated companies...... (7)
Elimination of recurring results
from the disposed Cyprus Amax
Lithium segment:
Sales and other operating
revenues..................... (218)
Cost of products sold
(derived).................... (200)
Depreciation, depletion and
amortization expense......... (7)
</TABLE>
(B) Phelps Dodge estimates it will incur approximately $30 million of
transaction costs, consisting primarily of investment bankers, attorneys
and accountant fees, and financial printing and other charges. These
estimates are preliminary and therefore are subject to change.
(C) If the business combinations are consummated, they will be
accounted for using the purchase method of accounting in accordance with
generally accepted accounting principles. Accordingly, the assets and
liabilities of Asarco and Cyprus Amax would be recorded at their estimated
fair values.
Phelps Dodge has not had access to information that is within the
peculiar knowledge of Asarco and Cyprus Amax and has not performed its due
diligence necessary to determine the fair value of their assets
65
<PAGE> 74
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
or liabilities or to identify unknown liabilities or obligations. Pro forma
adjustments to allocate the purchase price have been recorded in the
Unaudited Pro Forma Combined Financial Information on the basis of fair
values reported for certain assets and liabilities in public information of
Asarco and Cyprus Amax. Because fair value information for the remaining
assets and liabilities and any possible identifiable intangible assets are
not reasonably available to Phelps Dodge, the excess of the historical net
book values of Asarco's and Cyprus Amax's assets acquired over the
estimated purchase price has been allocated as a reduction of their
combined net property, plant and equipment.
Additionally, Phelps Dodge believes that cost savings will be realized
upon the consolidation and integration of the three companies. Phelps Dodge
has not developed formal plans for combining the three operations.
Accordingly, additional liabilities may be incurred in connection with the
business combinations and any ultimate restructuring. These additional
liabilities and costs have not been contemplated in the Unaudited Pro Forma
Combined Financial Information because information necessary to reasonably
estimate such costs and to formulate detailed restructuring plans is not
available to Phelps Dodge. Accordingly, the allocation of the purchase
price cannot be estimated with a reasonable degree of accuracy and may
differ materially from the amounts assumed in the Unaudited Pro Forma
Combined Financial Information.
The pro forma purchase price allocation adjustments are estimated as
follows (in millions):
<TABLE>
<S> <C>
Reduction of debt to fair value (as reported in Cyprus
Amax's June 30, 1999, Form 10-Q and the Form S-4
Registration Statement of Asarco Cyprus Incorporated filed
August 20, 1999).......................................... $ 95
Restricted investment in Grupo Mexico (as reported in
Asarco's December 31, 1998, Form 10-K).................... $ 29
Increase in LIFO based inventory to replacement cost (as
reported in Asarco's June 30, 1999, Form 10-Q and in
Cyprus Amax's December 31, 1998, Form 10-K)............... $ 84
Excess projected benefit obligation over the fair value of
pension plan assets (as reported in Cyprus Amax's December
31, 1998, Form 10-K, comprising a $5 million reduction of
prepaid expenses and other assets and a $52 million
increase in other liabilities and deferred credits)....... $ 57
Excess fair value of pension plan assets over the projected
benefit obligation (as reported in Asarco's December 31,
1998, Form 10-K).......................................... $ 10
Reduction in deferred tax liabilities (Note E).............. $ 253
Reduction in net property plant and equipment (derived)..... $1,037
</TABLE>
(D) The pro forma adjustments reflect the redemption of all 4,664,000
outstanding shares of Cyprus Amax's Series A Preferred Stock which are
redeemable at Cyprus Amax's option at $52.40 per share and the issuance by
Phelps Dodge of $244 million of ten-year debt to finance the redemption.
Interest is estimated to be fixed at 7.75% resulting in annual interest
expense of $19 million. The interest rate estimate was based upon ten-year
treasury bill rates at August 17, 1999, plus Phelps Dodge's indicative rate
basis points. A change in the interest rate on the debt by 1/8 percent
would impact annual interest expense by approximately $300,000. Debt issue
costs are estimated to be approximately $5 million with annual amortization
of approximately $500,000.
(E) The estimated income tax effect of the pro forma adjustments have
been recorded based upon the estimated effective tax rates of approximately
32% for Asarco and 15% for Cyprus Amax which rates have been derived from
public quarterly and annual filings of Asarco and Cyprus Amax. The business
combinations are expected to be tax-free transactions with Asarco's and
Cyprus Amax's historical tax bases surviving for income tax reporting
purposes.
66
<PAGE> 75
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
Provisions for pro forma income tax expense have been recorded for pro
forma adjustments to the Pro Forma Combined Statements of Operations
resulting from pro forma purchase price allocation adjustments and other
items.
Cyprus Amax has reported $176 million of U.S. net operating loss
carryforwards through 1998, expiring from 1999 to 2012, which along with
other deferred tax assets are subject to an existing valuation allowance.
Asarco has reported $573.7 million of net loss carryforwards, which expire
if unused from 2008 through 2018. The net operating loss carryforwards may
be subject to annual limitations after the acquisitions because of the
change in ownership rules. The annual limits will be calculated as the
long-term tax exempt rate (currently 5.18%) times the separate fair market
values of Cyprus Amax and Asarco, with Asarco's value potentially
determined without SPCC. Once all facts are known, the annual limits may
necessitate an increase in the consolidated valuation allowance for
deferred tax assets.
Pro forma income tax expense and deferred tax allocations recorded
upon consummation of the business combinations could vary significantly
from the pro forma estimates because information regarding Asarco's and
Cyprus Amax's income tax reporting is not available to Phelps Dodge.
(F) This pro forma adjustment reflects the issue of 44,660,000 shares
of Phelps Dodge common stock in connection with the exchange offers for all
the outstanding common shares of Asarco and Cyprus Amax. The common stock
of Phelps Dodge represents common shares of $279 million at $6.25 per share
par value and capital in excess of par of $2,342 million. No common shares
have been included for the potential share issues in connection with the
outstanding stock options of Asarco and Cyprus Amax.
(G) These pro forma adjustments eliminate the historical
shareholders' equity accounts of Asarco and Cyprus Amax.
(H) This pro forma adjustment records the estimated reduction in
depreciation, depletion and amortization expense related to the pro forma
reduction in property, plant and equipment recorded in connection with the
business combination purchase price allocation. Because neither fair value
nor book value information regarding the composition of Asarco's or Cyprus
Amax's property, plant and equipment is available to Phelps Dodge, actual
adjustments to depreciation, depletion and amortization expense could
differ substantially from these estimates.
(I) Phelps Dodge holds a 14.0% equity interest in Southern Peru
Copper Corporation (SPCC) which is accounted for as a cost basis investment
with a book value of $13.2 million at June 30, 1999. Asarco reports a 54.3%
equity interest in SPCC which it consolidated in both its June 30, 1999,
Form 10-Q and December 31, 1998, Form 10-K. As a result of Phelps Dodge's
increased ownership in SPCC that would arise through the acquisition of
Asarco, Phelps Dodge would qualify for use of the consolidation method of
reporting for its investment in SPCC. Accordingly, a pro forma adjustment
is recorded to consolidate Phelps Dodge's interest in SPCC including the
elimination of Phelps Dodge's cost basis investment in SPCC and its
recognition of dividend income from SPCC, the reduction of minority
interests in consolidated subsidiaries representing Phelps Dodge's 14.0%
interest, and the retroactive restatement of Phelps Dodge's retained
earnings.
(J) This pro forma adjustment recognizes imputed interest expense
resulting from the fair value adjustment of Asarco's long-term debt as
reported in the Form S-4 Registration Statement of Asarco Cyprus
Incorporated filed August 20, 1999. A pro forma adjustment to recognize
imputed interest resulting from the $42 million fair value adjustment of
Cyprus Amax's debt has not been provided because information necessary to
calculate such adjustment is not reasonably available to Phelps Dodge.
67
<PAGE> 76
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
(K) Pro forma weighted average common stock and common stock
equivalents outstanding are estimated as follows (in millions):
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1999 1998
---------------- ----------------
BASIC DILUTED BASIC DILUTED
----- ------- ----- -------
<S> <C> <C> <C> <C>
Average number of Phelps Dodge common
shares outstanding.................... 57.8 57.8 58.2 58.5
Phelps Dodge common shares to be issued
in connection with the business
combination (Note 2).................. 44.7 44.7 44.7 44.7
----- ----- ----- -----
102.5 102.5 102.9 103.2
===== ===== ===== =====
</TABLE>
The average number of common shares outstanding does not give effect
to Asarco's and Cyprus Amax's outstanding stock options or other common
stock equivalents, which cannot be estimated because information is not
available to Phelps Dodge. Based upon public information reported and the
current exchange offer ratios, Phelps Dodge estimates that the incremental
number of Phelps Dodge shares issueable upon the exercise of Cyprus Amax
and Asarco stock options is approximately 3 million.
68
<PAGE> 77
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND CYPRUS AMAX COMBINED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating revenues... $1,354 561 -- 1,915
------ --- ---- -----
Operating costs and expenses
Cost of products sold.............. 1,073 428 -- 1,501
Depreciation, depletion
and amortization................ 144 104 (4)(H) 244
Selling and general administrative
expense......................... 60 34 -- 94
Exploration and research expense... 21 8 -- 29
Non-recurring charges and provision
for asset dispositions*......... 83 -- -- 83
------ --- ---- -----
Total operating costs and expenses... 1,381 574 (4) 1,951
------ --- ---- -----
Operating income (loss).............. (27) (13) 4 (36)
Interest expense................... (48) (69) (9)(D) (126)
Capitalized interest............... -- 2 -- 2
Miscellaneous income and
expense, net.................... (7) (11) 8(A) (10)
------ --- ---- -----
Income (loss) before taxes, minority
interests and equity in net
earnings of affiliated companies... (82) (91) 3 (170)
Provision for taxes on income...... 19 14 (1)(E)
(1)(A) 31
Minority interests in consolidated
subsidiaries.................... 1 -- -- 1
Equity in net earnings (losses) of
affiliated companies............ 5 -- (7)(A) (2)
------ --- ---- -----
Income (loss) from continuing
operations......................... (57) (77) (6) (140)
Preferred stock dividends.......... -- (9) 9(D) --
------ --- ---- -----
Income (loss) from continuing
operations applicable to common
shares............................. $ (57) (86) 3 (140)
====== === ==== =====
Net earnings (loss) per share
Basic.............................. $(0.98) (1.62)
Diluted............................ $(0.98) (1.62)
Weighted average shares outstanding
Basic.............................. 57.8 86.2
Diluted............................ 57.8 86.2
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
Registration Statement for a description of non-recurring charges and
provision for asset dispositions.
69
<PAGE> 78
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND CYPRUS AMAX COMBINED
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating
revenues........................ $3,064 1,660 (218)(A) 4,506
------ ----- ---- -----
Operating costs and expenses
Cost of products sold............. 2,361 1,087 (200)(A) 3,248
Depreciation, depletion and
amortization................. 293 254 (7)(A)
(6)(H) 534
Selling and general
administrative expense....... 123 105 -- 228
Exploration and research
expense...................... 55 45 -- 100
Non-recurring charges and
provision for asset
dispositions*................ (191) 118 -- (73)
------ ----- ---- -----
Total operating costs and
expenses........................ 2,641 1,609 (213) 4,037
------ ----- ---- -----
Operating income (loss)........... 423 51 (5) 469
Interest expense................ (97) (157) (19)(D) (273)
Capitalized interest............ 2 2 -- 4
Miscellaneous income and
expense, net................. 9 17 -- 26
------ ----- ---- -----
Income (loss) before taxes,
minority interests and equity in
net earnings of affiliated
companies....................... 337 (87) (24) 226
Provision for taxes on income... (134) (11) 4(E) (141)
Minority interests in
consolidated subsidiaries.... (8) 1 -- (7)
Equity in net earnings (losses)
of affiliated companies...... (4) (53) -- (57)
------ ----- ---- -----
Income (loss) from continuing
operations...................... 191 (150) (20) 21
Preferred stock dividends....... -- (19) 19(D) --
------ ----- ---- -----
Income (loss) from continuing
operations applicable to common
shares.......................... $ 191 (169) (1) 21
====== ===== ==== =====
Net earnings (loss) per share
Basic........................... $ 3.28 0.24
Diluted......................... $ 3.26 0.24
Weighted average shares
outstanding
Basic........................... 58.2 86.6
Diluted......................... 58.5 86.9
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
Registration Statement for a description of non-recurring charges and
provision for asset dispositions.
70
<PAGE> 79
PHELPS DODGE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
PHELPS DODGE AND CYPRUS AMAX COMBINED
JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. $ 144 1,275 (20)(B)
(45)(C)
(5)(D) 1,349
Accounts receivable, net............... 396 37 -- 433
Inventories............................ 263 239 4(C) 506
Supplies............................... 104 55 -- 159
Prepaid expenses....................... 15 74 (5)(C) 84
Deferred income taxes.................. 45 32 -- 77
------ ----- ------ -----
Current assets....................... 967 1,712 (71) 2,608
Investments and long-term accounts
receivable........................... 95 328 9(A) 432
Property, plant and equipment, net..... 3,501 2,546 (90)(C) 5,957
Other assets and deferred charges...... 339 160 (9)(A)
5(D) 495
------ ----- ------ -----
Total Assets.................... $4,902 4,746 (156) 9,492
====== ===== ====== =====
LIABILITIES
Short-term debt........................ $ 214 249 -- 463
Current portion of long-term debt...... 62 79 -- 141
Accounts payable and accrued
expenses............................. 456 324 -- 780
Dividends payable...................... 29 9 -- 38
Accrued income taxes................... 11 81 -- 92
------ ----- ------ -----
Current liabilities.................. 772 742 -- 1,514
Long-term debt......................... 801 1,499 244(D)
(42)(C) 2,502
Deferred income taxes.................. 493 14 (15)(E) 492
Other liabilities and deferred
credits.............................. 376 412 52(C) 840
------ ----- ------ -----
2,442 2,667 239 5,348
------ ----- ------ -----
Minority interests in consolidated
subsidiaries........................... 86 20 -- 106
------ ----- ------ -----
Common shareholders' equity
Common shares.......................... 362 1 (1)(G)
177(F) 539
Treasury shares........................ -- (86) 86(A) --
Preferred shares....................... -- 5 (5)(D) --
Capital in excess of par value......... 5 2,912 (86)(A)
(2,826)(G)
1,487(F) 1,492
Retained earnings...................... 2,198 (768) 768(G) 2,198
Accumulated other comprehensive income
(loss)............................... (183) (5) 5(G) (183)
Other.................................. (8) -- -- (8)
------ ----- ------ -----
Total Shareholders' Equity...... 2,374 2,059 (395) 4,038
------ ----- ------ -----
Total Liabilities and
Shareholders' Equity.......... $4,902 4,746 (156) 9,492
====== ===== ====== =====
</TABLE>
71
<PAGE> 80
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information has been derived
from historical consolidated financial statements of Phelps Dodge and Cyprus
Amax incorporated by reference into this Registration Statement. See Phelps
Dodge "Unaudited Pro Forma Combined Financial Information" on page 58 of this
prospectus.
The assumptions and related pro forma adjustments described below have been
developed from public historical information available to Phelps Dodge. Pro
forma adjustments have been included only to the extent known and reasonably
available to Phelps Dodge. Additional information may exist that could
materially affect the assumptions and related pro forma adjustments. Such
information is not available to Phelps Dodge because it is within the particular
and singular knowledge of Cyprus Amax.
2. THE OFFER
Phelps Dodge is proposing a business combination of Phelps Dodge and Cyprus
Amax through a separate offering to exchange all the issued and outstanding
Cyprus Amax common shares for Phelps Dodge common shares, see "The Offer" on
page 32 of this prospectus.
Phelps Dodge proposes to exchange all the issued and outstanding Cyprus
Amax common shares for Phelps Dodge common shares at an exchange ratio of 0.3135
Phelps Dodge common share for each Cyprus Amax common share.
The transaction would be accounted for under the purchase method. The
purchase price for the business combinations is estimated as follows (dollars in
millions and shares in thousands except per share data):
<TABLE>
<CAPTION>
CYPRUS
AMAX
--------
<S> <C>
Common shares outstanding (as reported in June 30, 1999,
Form 10-Q)................................................ 90,454
Exchange offer ratio of Phelps Dodge common shares for each
common share.............................................. 0.3135
Phelps Dodge common shares to be issued..................... 28,357
Market price of each Phelps Dodge common share on August 20,
1999, prior to trading halt............................... $58.6875
========
Fair value of Phelps Dodge common shares issued, comprising
par value of $177 ($6.25 per share) and capital in excess
of par of $1,487.......................................... $ 1,664
Redemption of Cyprus Amax Series A Preferred Stock (Note
3D)....................................................... 244
Estimated transaction costs................................. 20
--------
Purchase price.............................................. $ 1,928
========
</TABLE>
The final purchase price could change materially from the purchase price
estimated above as a result of changes in the market price of common shares of
Phelps Dodge and/or the relative market price of Cyprus Amax common shares.
There are arrangements in place at Cyprus Amax that could impact the purchase
price including employment agreements, change of control severance agreements,
stock appreciation rights, and certain pension and other employee benefit plans.
In addition, actions may be taken by the management of Cyprus Amax, in a
defensive posture or for other reasons, that could impact the purchase price
including amending existing agreements or issuing stock options and other
similar bonus awards. The potential impact of these factors cannot be estimated
but could be material.
The estimated purchase price does not give effect to outstanding stock
options which could impact the number of Phelps Dodge shares issued and/or the
purchase price either by their exercise or their conversion to
72
<PAGE> 81
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
outstanding stock options of Phelps Dodge. Such effects prior to completion of
the business combination cannot be reasonably estimated from available public
information. As reported in its December 31, 1998, Form 10-K, Cyprus Amax had
6,346,801 stock options outstanding of which 2,024,009 had weighted average
exercise prices less than the per share equivalent value of Cyprus Amax common
stock as determined by the terms of the exchange offer. If Cyprus Amax's
2,024,009 stock options were exercised prior to consummation of the business
combination, the estimated purchase price would be increased by approximately
$37 million which would be substantially offset by cash and cash equivalents
received as proceeds from such exercises. Although it is Phelps Dodge's desire
that all outstanding Cyprus Amax stock options be converted to Phelps Dodge
stock options at the respective offering exchange ratio, it is not assured
whether such conversions can be achieved in whole or in part nor, consequently,
the potential effect on the purchase price.
The estimated purchase price does not include any effect of Cyprus Amax's
outstanding preferred share purchase rights. As described in its December 31,
1998, Form 10-K, Cyprus Amax issued in February 1999 one preferred purchase
right for each share of common stock which confers certain rights to the holder
including certain rights in the event of an acquisition of 15% or more of Cyprus
Amax's common stock.
The final determination of the purchase price may differ from the amount
assumed in the Unaudited Pro Forma Combined Financial Information and that
difference may be material.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The following assumptions and related pro forma adjustments give effect to
the proposed business combination of Phelps Dodge and Cyprus Amax as if such
combination occurred on January 1, 1998, in the Unaudited Pro Forma Combined
Statements of Operations for the six-month interim period ended June 30, 1999,
and for the year ended December 31, 1998, respectively, and on June 30, 1999,
for the Unaudited Pro Forma Combined Balance Sheet.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the business combination with Cyprus Amax
occurred on the respective dates assumed, nor is it necessarily indicative of
future consolidated operating results or financial position.
Future cash cost savings are not recognized in this Unaudited Pro Forma
Combined Financial Information. Non-recurring items related to 1998 and the
six-month interim period ended June 30, 1999 are included (see "Selected
Historical Financial Data" at pages 51 through 55 for a summary of non-recurring
items and special charges).
(A) Reclassifications have been made to the Cyprus Amax historical
consolidated financial information to conform to Phelps Dodge's
presentation. The historical financial information of Cyprus Amax excludes
the results of operations and assets of its discontinued Coal segment as
reported for 1998 operations in Cyprus Amax's Form 8-K dated June 30, 1999,
and as reported as of and for the six months ended June 30, 1999, in its
Form 10-Q filing for such period. Cyprus Amax's historical financial
information for the year ended December 31, 1998, also has been adjusted to
exclude the identifiable results of recurring operations of its Lithium
segment which was sold in October 1998.
73
<PAGE> 82
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
BALANCE SHEET SIX MONTHS YEAR ENDED
AT JUNE 30, ENDED DECEMBER 31,
1999 JUNE 30, 1999 1998
------------- ------------- ------------
(IN $ MILLIONS)
<S> <C> <C> <C>
Reclassification adjustments:
Investments and notes
receivable............... 9
Other assets and deferred
charges.................. (9)
Treasury shares............. 86
Capital in excess of par
value.................... (86)
Miscellaneous income and
expense, net............. 8
Provision for taxes on
income................... (1)
Equity in net earnings
(losses) of affiliated
companies................ (7)
Elimination of recurring
results from sold Lithium
segment:
Sales and other operating
revenues................. (218)
Cost of products sold
(derived)................ (200)
Depreciation, depletion and
amortization expense..... (7)
</TABLE>
(B) Phelps Dodge estimates it will incur approximately $20 million of
transaction costs, consisting primarily of investment bankers, attorneys
and accountant fees, and financial printing and other charges. These
estimates are preliminary and therefore are subject to change.
(C) If the business combination is consummated, it will be accounted
for using the purchase method of accounting in accordance with generally
accepted accounting principles. Accordingly, the assets and liabilities of
Cyprus Amax would be recorded at their estimated fair values.
Phelps Dodge has not had access to information that is within the
peculiar knowledge of Cyprus Amax and has not performed its due diligence
necessary to determine the fair value of its assets or liabilities or to
identify unknown liabilities or obligations. Pro forma adjustments to
allocate the purchase price have been recorded in the Unaudited Pro Forma
Combined Financial Information on the basis of fair values reported for
certain assets and liabilities in public information of Cyprus Amax.
Because fair value information for the remaining assets and liabilities and
any possible identifiable intangible assets are not reasonably available to
Phelps Dodge, the excess of the historical net book values of Cyprus Amax's
assets acquired over the estimated purchase price has been allocated as a
reduction of its combined net property, plant and equipment.
Additionally, Phelps Dodge believes that cost savings will be realized
upon the consolidation and integration of Cyprus Amax. Phelps Dodge has not
developed formal plans for combining the operations. Accordingly,
additional liabilities may be incurred in connection with the business
combination and any ultimate restructuring. These additional liabilities
and costs have not been contemplated in the Unaudited Pro Forma Combined
Financial Information because information necessary to reasonably estimate
such costs and to formulate detailed restructuring plans is not available
to Phelps Dodge. Accordingly, the allocation of the purchase price cannot
be estimated with a reasonable degree of accuracy and may differ materially
from the amounts assumed in the Unaudited Pro Forma Combined Financial
Information.
74
<PAGE> 83
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
The merger agreement by and between Asarco and Cyprus Amax has a $45
million termination fee under certain circumstances. If such fee is
required to be paid upon consummation of Phelps Dodge's proposed
acquisition of Cyprus Amax, cash and cash equivalents of Cyprus Amax would
be decreased by the fee payment which in turn would impact the purchase
price allocation. The Unaudited Pro Forma Combined Financial Information
has been adjusted to give effect to payment of the termination fee.
The pro forma purchase price allocation adjustments are estimated as
follows (in millions):
<TABLE>
<S> <C>
Reduction of debt to fair value (as reported in Cyprus
Amax's June 30, 1999, Form 10-Q).......................... $42
Increase in LIFO based inventory to replacement cost (as
reported in Cyprus Amax's December 31, 1998, Form 10-K)... $ 4
Excess projected benefit obligation over the fair value of
pension plan assets (as reported in Cyprus Amax's December
31, 1998, Form 10-K, comprising a $5 million reduction of
prepaid expenses and other assets and a $52 million
increase in other liabilities and deferred credits)....... $57
Reduction in deferred tax liabilities (Note E).............. $15
Reduction in net property plant and equipment (derived)..... $90
</TABLE>
(D) The pro forma adjustments reflect the redemption of all 4,664,000
outstanding shares of Cyprus Amax's Series A Preferred Stock which are
redeemable at Cyprus Amax's option at $52.40 per share and the issuance by
Phelps Dodge of $244 million of ten-year debt to finance the redemption.
Interest is estimated to be fixed at 7.75% resulting in annual interest
expense of $19 million. The interest rate estimate was based upon ten-year
treasury bill rates at August 17, 1999, plus Phelps Dodge's indicative rate
basis points. A change in the interest rate on the debt by 1/8 percent
would impact annual interest expense by approximately $300,000. Debt issue
costs associated with the debt are estimated to be approximately $5 million
with annual amortization of approximately $500,000.
(E) The estimated income tax effect of the pro forma adjustments has
been recorded based upon the estimated effective tax rate of approximately
15% for Cyprus Amax which rate has been derived from public quarterly and
annual filings. The business combination is expected to be a tax-free
transaction with Cyprus Amax's historical tax bases surviving for income
tax reporting purposes.
A provision for pro forma income tax expense has been recorded for pro
forma adjustments to the Pro Forma Combined Statements of Operations
resulting from pro forma purchase price allocation adjustments and other
items.
Cyprus Amax has reported $176 million of U.S. net operating loss
carryforwards through 1998, expiring from 1999 to 2012, which along with
other deferred tax assets are subject to an existing valuation allowance.
The net operating loss carryforwards may be subject to annual limitations
after the acquisition because of the change in ownership rules. The annual
limits will be calculated as the long-term tax exempt rate (currently
5.18%) times the fair market value of Cyprus Amax. Once all facts are
known, the annual limits may necessitate an increase in the consolidated
valuation allowance for deferred tax assets.
Pro forma income tax expense and deferred tax allocations recorded
upon consummation of the business combination could vary significantly from
the pro forma estimates because information regarding Cyprus Amax's income
tax reporting is not available to Phelps Dodge.
(F) This pro forma adjustment reflects the issue of 28,357,000 shares
of Phelps Dodge common stock in connection with the exchange offers for all
the outstanding common shares of Cyprus Amax. The common stock of Phelps
Dodge represents common shares of $177 million at $6.25 per share par value
75
<PAGE> 84
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
and capital in excess of par of $1,487 million. No common shares have been
included for the potential shares issues in connection with the outstanding
stock options of Cyprus Amax.
(G) These pro forma adjustments eliminate the historical shareholders'
equity accounts of Cyprus Amax.
(H) This pro forma adjustment records the estimated reduction in
depreciation, depletion and amortization expense related to the pro forma
reduction in property, plant and equipment recorded in connection with the
business combination purchase price allocation. Because neither fair value
nor book value information regarding the composition of Cyprus Amax's
property, plant and equipment is available to Phelps Dodge, actual
adjustments to depreciation, depletion and amortization expense could
differ substantially from these estimates.
(I) A pro forma adjustment to recognize imputed interest resulting
from the $42 million fair value adjustment of Cyprus Amax's debt has not
been provided because information necessary to calculate such adjustment is
not reasonably available to Phelps Dodge.
(J) Pro forma weighted average common stock and common stock
equivalents outstanding are estimated as follows (in millions):
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1999 1998
---------------- ----------------
BASIC DILUTED BASIC DILUTED
----- ------- ----- -------
<S> <C> <C> <C> <C>
Average number of Phelps Dodge
common shares outstanding......... 57.8 57.8 58.2 58.5
Phelps Dodge common shares to be
issued in connection with the
business combination (Note 2)..... 28.4 28.4 28.4 28.4
---- ---- ---- ----
86.2 86.2 86.6 86.9
==== ==== ==== ====
</TABLE>
The average number of common shares outstanding does not give effect to
Cyprus Amax's outstanding stock options or other common stock equivalents, which
cannot be estimated because information is not available to Phelps Dodge. Based
upon public information reported and the current exchange offer ratio, Phelps
Dodge estimates that the incremental number of Phelps Dodge shares issueable
upon the exercise of Cyprus Amax stock options is approximately 3 million.
76
<PAGE> 85
DESCRIPTION OF PHELPS DODGE CAPITAL STOCK
The following description of the terms of the capital stock of Phelps Dodge
is not meant to be complete and is qualified by reference to Phelps Dodge's
Restated Certificate of Incorporation (the Phelps Dodge charter), which is
incorporated herein by reference. See "Where You Can Find Additional
Information."
AUTHORIZED CAPITAL STOCK
Under the Phelps Dodge charter, Phelps Dodge's authorized capital stock
consists of 200,000,000 shares of Phelps Dodge common stock, par value $6.25 per
share, and 6,000,000 shares of Phelps Dodge preferred stock, par value $1.00 per
share.
PHELPS DODGE COMMON STOCK
Phelps Dodge Common Stock Outstanding. The outstanding shares of Phelps
Dodge common stock are, and the shares of Phelps Dodge common stock issued
pursuant to the exchange offers will be, duly authorized, validly issued, fully
paid and nonassessable.
Voting Rights. Each holder of Phelps Dodge common stock is entitled to one
vote for each share of Phelps Dodge common stock held of record on the
applicable record date on all matters submitted to a vote of shareholders.
Dividend Rights; Rights upon Liquidation. The holders of Phelps Dodge
common stock are entitled to receive, from funds legally available for the
payment thereof, dividends when and as declared by resolution of the Phelps
Dodge Board of Directors, subject to any preferential dividend rights granted to
the holders of any outstanding Phelps Dodge preferred stock. In the event of
liquidation, each share of Phelps Dodge common stock is entitled to share pro
rata in any distribution of Phelps Dodge's assets after payment or providing for
the payment of liabilities and the liquidation preference of any outstanding
Phelps Dodge preferred stock.
Preemptive Rights. Holders of Phelps Dodge common stock have no preemptive
rights to purchase, subscribe for or otherwise acquire any unissued or treasury
shares or other securities.
PHELPS DODGE PREFERRED STOCK
Phelps Dodge Preferred Stock Outstanding. As of the date of this
prospectus, no shares of Phelps Dodge preferred stock were issued and
outstanding.
Authorized Preferred Stock. Under Phelps Dodge's charter, the Phelps Dodge
Board of Directors has the authority, without shareholder approval, to create
one or more classes or series within a class of preferred stock, to issue shares
of preferred stock in such class or series up to the maximum number of shares of
the relevant class or series of preferred stock authorized, and to determine the
preferences, rights, privileges and restrictions of any such class or series,
including the dividend rights, voting rights, the rights and terms of
redemption, the rights and terms of conversion, liquidation preferences, the
number of shares constituting any such class or series and the designation of
such class or series.
The Phelps Dodge Board of Directors has designated a series of preferred
stock as Junior Participating Cumulative Preferred Shares, and has issued rights
to purchase those shares which are exercisable only upon the occurrence of
certain events described below under "Comparison of Rights of Holders of Phelps
Dodge Shares and Cyprus Amax Shares -- Comparison of Charter and By-law
Provisions -- Capitalization."
TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR
ChaseMellon Shareholder Services, LLC is the transfer and dividend paying
agent and registrar for the Phelps Dodge common stock.
77
<PAGE> 86
COMPARISON OF RIGHTS OF HOLDERS OF
PHELPS DODGE SHARES AND CYPRUS AMAX SHARES
Upon completion of our proposed business combination, the shareholders of
Cyprus Amax will become shareholders of Phelps Dodge, rather than shareholders
of Asarco Amax. As Phelps Dodge shareholders, the rights of former Cyprus Amax
shareholders will be governed by Phelps Dodge's charter and by-laws, which
differ in certain material respects from Cyprus Amax's charter and by-laws. In
addition, New York is the jurisdiction of incorporation of Phelps Dodge, while
Delaware is the jurisdiction of incorporation of Cyprus Amax. As Phelps Dodge
shareholders, the rights of former Cyprus Amax shareholders will therefore be
governed by the New York Business Corporation Law (NYBCL) instead of the
Delaware General Corporation Law (DGCL).
The following is a comparison of:
- the current rights of Cyprus Amax shareholders under the DGCL and the
Cyprus Amax charter and by-laws; and
- the rights Cyprus Amax shareholders would have as Phelps Dodge
shareholders under the NYBCL and the Phelps Dodge charter and by-laws
upon the consummation of a business combination between Phelps Dodge and
Cyprus Amax.
The comparison summarizes the material differences but is not intended to
list all differences and is qualified by reference to New York law, Delaware
law, the Phelps Dodge charter and by-laws and the Cyprus Amax charter and
by-laws. The summary of the Cyprus Amax charter and by-laws is derived from the
disclosure in the Form S-4 filed by Asarco Cyprus Incorporated on August 20,
1999.
COMPARISON OF CHARTER AND BY-LAW PROVISIONS
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
BOARD OF DIRECTORS
Classified Board Divided into three classes, Divided into three classes,
as nearly equal in number as as nearly equal in number as
possible, with each class possible, with each class
serving a staggered serving a staggered
three-year term. three-year term.
Removal of Directors Under Cyprus Amax's charter A director may be removed by
and by-laws, a director may the stockholders only for
be removed only for cause, cause.
and only by the affirmative
vote of holders of 75% of the
outstanding voting stock. The
DGCL generally provides that
directors may be removed,
with or without cause, by
stockholder majority vote. An
exception applies to
corporations with classified
boards like Cyprus Amax.
Unless the charter provides
otherwise, stockholders of
such a corporation may remove
directors only for cause.
Filling of Board Vacancies With some exceptions, Vacancies on the board of
vacancies on the board may be directors may be filled only
filled by majority vote of by vote of the directors.
the remaining directors then
in office.
</TABLE>
78
<PAGE> 87
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
Size of Board Board must consist of not Board must consist of not
less than three directors, as less than 9 nor more than 12
fixed from time to time by directors, as fixed from time
resolution of the board. The to time by resolution of the
current number of directors board. The current number of
is 10. directors is 11.
STOCKHOLDER MEETINGS
Annual Meeting Held on date fixed by board. Held on the first Wednesday
in May, or on another date
fixed by the board from time
to time.
Calling a Special Meeting Only the Chairman of the Only the board of directors
Board, the President, the or the Chairman of the Board
board of directors or the may call a special meeting.
holders of a majority of the
voting stock may call a
special meeting.
Quorum Requirements The presence, in person or by Generally, the presence, in
proxy, of the holders of person or by proxy, of the
33 1/3% of the outstanding holders of a majority of the
voting stock constitutes a shares entitled to vote at
quorum at the meeting. the meeting constitutes a
quorum for that meeting.
Certain Voting Requirements Stockholder action approving Phelps Dodge's charter and
a merger or consolidation or by- laws contain no
a sale of all or comparable supermajority
substantially all of Cyprus voting requirements. Under
Amax's assets requires the the NYBCL, the consummation
affirmative vote by the by Phelps Dodge of a merger,
holders of the majority of consolidation or disposition
outstanding voting stock; of substantially all of its
stockholder action on other assets requires the approval
matters, except for elections of two- thirds of all the
of directors, certain shares of Phelps Dodge
amendments of organizational entitled to vote on the
documents and certain proposal including, in
transactions with the certain situations, the
beneficial owner of more than affirmative vote by the
10% of any class of capital holders of a majority of all
stock of Cyprus Amax, outstanding shares of each
requires affirmative vote of class or series of shares.
the majority of votes cast at Abstentions have the effect
a meeting. Abstentions have of a vote against a proposed
the effect of a vote against matter only if the
a proposed matter only if the affirmative vote required is
affirmative vote required is that of the majority of the
that of the majority of the total votes represented by
total votes represented by the outstanding voting stock.
the outstanding voting stock.
Cyprus Amax's charter
requires the vote of 75% of
the outstanding shares of
Cyprus Amax's voting stock,
voting together as a single
class, for the
</TABLE>
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<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
approval of business
combinations specified in the
charter, including certain
transactions involving
beneficial owners of 10% or
more of Cyprus Amax's
outstanding voting stock.
Business combinations include
any merger or consolidation
of Cyprus Amax with any
interested stockholder, any
sale, lease or other
disposition of Cyprus Amax
assets having a fair market
value of $50 million or more
to an interested stockholder,
the issuance or transfer of
Cyprus Amax securities to an
interested stockholder for
consideration having a fair
market value of $50 million
or more, the adoption of any
plan or proposal by or on
behalf of an interested
stockholder for the
liquidation or dissolution of
Cyprus Amax in which the
interested stockholder
receives anything other than
cash, or any transaction
which has the effect of
increasing the proportionate
share of any class of Cyprus
Amax's stock owned by the
interested stockholder. The
charter's supermajority
requirements do not apply if
a majority of Cyprus Amax's
disinterested directors
approve the transaction and
certain other conditions are
met.
Separately, Cyprus Amax's
charter precludes Cyprus
Amax, among other things,
from repurchasing its stock,
securities convertible into
its stock, or similar
securities from an interested
stockholder who has
beneficially owned such
securities for less than two
years before the repurchase,
without the affirmative vote
of a majority of Cyprus
Amax's voting stock
(excluding voting stock owned
by the interested
stockholder),
</TABLE>
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<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
voting as a single class,
subject to some exceptions.
Stockholder Action by Written Stockholder action must be Stockholder action must be
Consent taken at an annual or special taken at an annual or special
meeting and not by written meeting and not by written
consent. consent, except that the
NYBCL permits stockholder
action by unanimous written
consent.
Advance Notice for To bring a matter (including Generally, to bring a matter
Stockholder Nominations and the nomination of directors) (including the nomination of
Other Business before an annual meeting, a directors) before an annual
stockholder generally must meeting, a stockholder must
give notice of a proposed give notice not less than 60
matter not less than 90 days days nor more than 90 days
prior to the anniversary of prior to the meeting, but if
the previous year's meeting, the meeting is scheduled for
but if less than 70 days a day other than the first
notice of the annual meeting Wednesday in May and less
is given to stockholders, a than 70 days' notice is given
stockholder must give notice or prior public announcement
of a proposed matter by the is made to stockholders, a
tenth day following the date stockholder must give notice
at which notice of the annual by the tenth day following
meeting was mailed. Cyprus the date at which notice of
Amax's by-laws contain the annual meeting was mailed
requirements as to the form or announcement thereof made.
and content of the notice. If the number of directors to
be elected at the election
meeting is increased or there
is a vacancy to be filled at
the election meeting in a
class of directors whose
terms do not expire at the
election meeting and there is
no public announcement at
least 70 days prior to the
election meeting naming all
of the nominees for director
or specifying the size of the
increased board of directors
or the number of directors to
be elected, a nominating
stockholder's notice is
timely if given by the tenth
day following the date on
which the public announcement
is first made, but only with
respect to nominees for any
positions created by the
increase or vacancy. Phelps
Dodge's by-laws contain
requirements as to the form
and content of the
stockholder's notice.
</TABLE>
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<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
AMENDMENTS TO ORGANIZATIONAL
DOCUMENTS
Certificate of Incorporation Generally may be amended by Under the NYBCL, subject to
board resolutions and the limited exceptions,
affirmative vote by the amendments to Phelps Dodge's
holders of a majority of the charter must be approved by
outstanding voting stock, vote of a majority of all
except that amendments to outstanding shares entitled
provisions relating to the to vote on the proposed
directors, stockholder amendment, except that
nominations and action, charter provisions requiring
by-law amendments, and a greater or class vote may
certain transactions with only be amended by such vote.
beneficial owners of 10% or In addition, an amendment
more of the outstanding that negatively affects in
common stock require the certain ways holders of
affirmative vote of the shares of a class or series
holders of 75% of the requires authorization by a
outstanding voting stock. majority of the votes of all
outstanding shares of the
class or series.
By-laws Generally may be amended by Phelps Dodge's by-laws permit
the affirmative vote of the the amendment of the by-laws
holders of a majority of the by a vote of a majority of
voting stock at the relevant all the directors at any
meeting, or by the regular or special meeting of
affirmative vote of a the board, except that
majority of the board. provisions relating to the
Amendments to certain repurchase of stock by Phelps
provisions of Cyprus Amax's Dodge may only be amended by
charter governing the majority vote of the
by-laws, including those stockholders. Generally,
relating to stockholder under the NYBCL, the by-laws
meetings and action, and the may also be amended by a
number, election and removal majority of the votes cast by
of directors, require the the shares entitled to vote
affirmative vote of the in the election of any
holders of 75% of the directors.
outstanding voting stock.
CAPITALIZATION
Authorized Stock Common stock: 150 million Common stock: 200 million
shares; preferred stock: 20 shares; preferred stock: 6
million shares. million shares.
Preferred Stock The board is authorized to The board is authorized to
issue preferred stock from issue preferred stock from
time to time in one or more time to time in one or more
series, with terms to be series, with terms to be
fixed by the board. fixed by the board.
Rights Plans Cyprus Amax has a rights Phelps Dodge has a rights
agreement, dated as of agreement, dated as of
February 28, 1999. The rights February 5, 1998. The rights
agreement triggers upon the agreement triggers upon the
acquisition by a third party acquisition by a third party
of 15% of Cyprus Amax's of 20% of Phelps Dodge's
</TABLE>
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<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
outstanding common stock. The outstanding common stock. The
board may redeem rights at board may redeem rights at
any time prior to the time any time prior to the time
such an acquisition takes such an acquisition takes
place. place.
Share Repurchases Cyprus Amax may generally The NYBCL prohibits Phelps
repurchase its own shares, Dodge from repurchasing more
although there are specific than 10% of its stock for
restrictions on such more than market value from a
repurchases when the seller stockholder who has held the
is a beneficial owner of 10% stock for less than two
or more of the voting power years, unless the repurchase
of the outstanding voting is approved by the board and
stock. by majority vote of the
outstanding voting stock.
Phelps Dodge's by-laws
provide that Phelps Dodge may
repurchase its stock only in
the regular course of
legitimate business or for
the purpose of retiring the
stock.
EXCULPATION AND Cyprus Amax's charter Phelps Dodge's charter
INDEMNIFICATION OF provides that no director provides that the personal
DIRECTORS, OFFICERS AND will be personally liable for liability of Phelps Dodge's
EMPLOYEES damages for breach of directors for any breach of
fiduciary duty, except in duty in such capacity is
cases where the director's eliminated to the fullest
acts or omissions breached extent permitted by the
his duty of loyalty to the NYBCL. The NYBCL permits
corporation or its Phelps Dodge to eliminate or
stockholders, were not in limit the personal liability
good faith or involved of directors to Phelps Dodge
intentional misconduct or a or its shareholders for
knowing violation of law, or damages for any breach of
provided an improper personal duty in such capacity except
benefit to the director. liability (i) of a director
(a) whose acts or omissions
The Cyprus Amax by-laws were in bad faith, involved
provide that Cyprus Amax will intentional misconduct or a
indemnify any director or knowing violation of law, (b)
officer to the fullest extent who personally gained a
permitted by law if such financial profit or other
director or officer is advantage to which he or she
involved in litigation by was not legally entitled or
reason of the fact that he is (c) whose acts violated
(or was) a director or certain provisions of New
officer, and provide in York law or (ii) for acts or
addition that Cyprus Amax may omissions prior to the
indemnify any person, other adoption in 1988 of Phelps
than a director or officer, Dodge's charter amendment.
if such person is involved in
litigation by reason of the Phelps Dodge's by-laws
fact that he is (or was) an provide that Phelps Dodge
employee. will indemnify any person
involved in litigation by
reason of the fact that he is
or was a director or officer
of Phelps Dodge, unless
</TABLE>
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<PAGE> 92
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
the director's or officer's
acts were committed in bad
faith or were the result of
his active and deliberate
dishonesty and were material
to the proceeding or the
director or officer
personally gained in fact a
financial profit or other
advantage to which he was not
legally entitled. Further,
Phelps Dodge's directors and
officers are covered by
insurance policies maintained
against certain liabilities,
including liabilities arising
under the Securities Act of
1933.
</TABLE>
COMPARISON OF CERTAIN STATUTORY PROVISIONS
APPRAISAL RIGHTS
CYPRUS AMAX STOCKHOLDER RIGHTS
Under Delaware law, appraisal rights, or rights of a stockholder to receive
the fair value of his stock in connection with a merger or consolidation, may be
available in connection with a merger or consolidation in certain specific
situations. Appraisal rights are not available to a corporation's stockholders
under Delaware law where the corporation is to be the surviving corporation and
no vote of its stockholders is required to approve the merger.
In addition, unless otherwise provided in the certificate of incorporation,
no appraisal rights are available under Delaware law to holders of shares of any
class of stock which is either (1) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by NASD or (2) held of record by more than 2,000 stockholders, unless
such stockholders are required by the terms of the merger to accept anything
other than:
- shares of stock of the surviving corporation;
- shares of stock of another corporation which, as of the effective date of
the merger or consolidation, are the kind described in clauses (1) and
(2) above;
- cash instead of fractional shares of such stock; or
- any combination of the consideration described in the three bullet items
above.
In addition, appraisal rights are not available under Delaware law in the
event of the sale of all or substantially all of a corporation's assets or the
adoption of an amendment to its certificate of incorporation, unless such rights
are granted in the corporate charter. The Cyprus Amax charter does not grant
such rights.
PHELPS DODGE STOCKHOLDER RIGHTS
Under New York law, appraisal rights are generally available in connection
with a merger or consolidation, except that no appraisal rights are available:
- to the stockholder of a parent corporation merging with its subsidiary
where the parent owns at least 90% of the subsidiary's outstanding stock
and certain additional requirements are met;
- to the stockholder of the surviving corporation in a merger (other than a
merger described in the previous bullet item) unless the merger adversely
affects rights of the shares held by the stockholder in a certain way; or
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<PAGE> 93
- to a shareholder of shares of any class or series of stock listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers.
Under the statutory provisions described above, since shares of Phelps Dodge
common stock are listed on the New York Stock Exchange, Phelps Dodge common
stockholders are not entitled to appraisal rights in connection with a merger or
consolidation.
Appraisal rights are also available under the NYBCL in connection with the
sale, lease, exchange or other disposition of all or substantially all of a
corporation's assets other than a transaction wholly for cash where shareholder
approval is conditioned upon the corporation's dissolution and the distribution
of all of the corporation's net assets within one year after the transaction.
Further, appraisal rights are available in connection with a share exchange
between two corporation as authorized by the NYBCL, except with respect to
shares of a subject corporation that are not acquired in the exchange or that
are listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers.
In addition, appraisal rights are available to a shareholder of a
subsidiary corporation that merges with its parent corporation, or is acquired
by it in a share exchange, where the parent owns at least 90% of the
subsidiary's outstanding stock and certain additional requirements are met.
Appraisal rights are also available to a shareholder who is not entitled to
vote with respect to a plan of merger or consolidation and whose shares will be
canceled or exchanged in the merger or consolidation for cash or other
consideration other than shares of the surviving or consolidated corporation or
another corporation.
CERTAIN BUSINESS COMBINATIONS
CYPRUS AMAX STOCKHOLDER RIGHTS
Delaware law restricts the ability of certain persons to acquire control of
a Delaware corporation.
Under the DGGL, if a person acquires 15% or more of the stock of a Delaware
corporation without the approval of the board of directors of that corporation,
thereby becoming an interested stockholder, that person generally may not engage
in certain transactions with the corporation for a period of three years unless
one of the following three exceptions applies:
- the board of directors approved the acquisition of stock or the
transaction prior to the time that the person became an interested
stockholder;
- upon consummation of the transaction in which the person became an
interested stockholder, the interested stockholder became an 85% owner of
the voting stock of the corporation in the transaction, excluding voting
stock owned by directors who are also officers and certain employee stock
plans; or
- the transaction is approved by the board of directors and by the
affirmative vote of 66 2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
The Cyprus Amax charter provides that certain transactions with the
beneficial owner of 10% of the voting power of the outstanding voting stock,
including a merger, significant dispositions of assets, certain issuances or
transfers of securities, certain plans of liquidation and dissolution, and
certain reclassifications of securities, generally require the affirmative vote
of 75% of the voting power of the outstanding shares of stock entitled to vote
in the election of directors, unless Cyprus Amax's disinterested directors
approve the transaction and certain other conditions are met.
PHELPS DODGE STOCKHOLDER RIGHTS
New York law restricts the ability of certain persons to acquire control of
a Delaware corporation.
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<PAGE> 94
In general, a New York corporation may not engage in a business combination
with an interested stockholder for a period of five years following the
interested stockholder's becoming such. Such a business combination would be
permitted where it is approved by the board of directors prior to the interested
stockholder's becoming such, or within 30 days thereafter, if a good faith
proposal regarding a business combination is made in writing.
Covered business combinations include certain mergers and consolidations,
dispositions of assets or stock, plans for liquidation or dissolution,
reclassifications of securities, recapitalizations and similar transactions. An
interested stockholder is generally a stockholder owning at least 20% of a
corporation's outstanding voting stock.
In addition, New York corporations may not engage at any time with any
interested stockholder in a business combination other than:
- a business combination approved by the board of directors prior to the
stock acquisition, or where the acquisition of the stock had been
approved by the board of directors prior to the stock acquisition,
- a business combination approved by the affirmative vote of the holders of
a majority of the outstanding voting stock not beneficially owned by the
interested stockholder at a meeting for that purpose no earlier than five
years after the stock acquisition, or
- a business combination in which the interested stockholder pays a formula
price designed to ensure that all other stockholders receive at least the
highest price per share paid by the interested stockholder and that meets
certain other requirements.
Phelps Dodge is governed by the NYBCL, as described above. Phelps Dodge's
charter does not contain a provision regarding transactions with interested
stockholders.
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<PAGE> 95
ASARCO AND CYPRUS AMAX INFORMATION
While we have included in this prospectus information concerning Asarco and
Cyprus Amax that is known to us based on publicly available information
(primarily filings by Asarco and Cyprus Amax with the SEC), we are not
affiliated with Asarco or Cyprus Amax and neither Asarco nor Cyprus Amax has
permitted us to have access to their books and records. Therefore, non-public
information concerning Asarco or Cyprus Amax was not available to us for the
purpose of preparing this prospectus. Although we have no knowledge that would
indicate that statements relating to Asarco or Cyprus Amax contained or
incorporated by reference in this prospectus are inaccurate or incomplete, we
were not involved in the preparation of those statements and cannot verify them.
Pursuant to rule 409 under the Securities Act of 1933 and rule 12b-21 under
the Securities Exchange Act of 1934, we are requesting that Asarco and Cyprus
Amax provide us with information required for complete disclosure regarding the
businesses, operations, financial condition and management of Asarco and Cyprus
Amax. We will amend or supplement this prospectus to provide any and all
information we receive from Asarco or Cyprus Amax, if we receive the information
before our offer expires and we consider it to be material, reliable and
appropriate. In addition, pursuant to rule 439 under the Securities Act, we are
requesting that PricewaterhouseCoopers LLP, the independent accountants of both
Asarco and Cyprus Amax, provide us with the consents required for us to
incorporate by reference into this prospectus the PricewaterhouseCoopers audit
reports included in Asarco's and Cyprus Amax's Annual Reports on Form 10-K for
the year ended December 31, 1998. If we receive those consents, we will promptly
file them as exhibits to our registration statement.
FORWARD-LOOKING INFORMATION
The U.S. securities laws provide a "safe harbor" for certain
forward-looking statements. This prospectus contains forward-looking statements,
including statements concerning the business, future financial position, results
of operations, business strategy, estimated cost savings and other benefits of
our proposed business combination, plans as to dividends and plans and
objectives of management for future operations of Phelps Dodge, Asarco and
Cyprus Amax. Forward-looking statements can be found, among other places, under
"The Proposed Combination," "Reasons for the Proposed Combination," "Background
of the Offer" and "Unaudited Pro Forma Combined Financial Information."
Generally, the words "will," "may," "should," "continue," "believes," "expects,"
"anticipates" or similar expressions identify forward-looking statements.
Forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those projected.
Statements regarding the expected benefits of our proposed business
combination with Asarco and Cyprus Amax, the expected commencement dates of
operations, projected quantities of future production, capital costs, production
rates and other operating and financial data are based on expectations that
Phelps Dodge believes are reasonable, but we can give no assurance that such
expectations will prove to have been correct. Factors that could cause actual
results to differ materially include, among others:
- risks and uncertainties relating to the timing of completion of the
proposed Phelps Dodge/Asarco/ Cyprus Amax business combination;
- the possibility that we will be unable to realize the expected cost
savings and other benefits from the combination,
- difficulties related to the integration of the businesses of Phelps
Dodge, Asarco and Cyprus Amax,
- the possibility that Phelps Dodge will not be able to combine with both
Asarco and Cyprus Amax,
- general U.S. and international economic, financial market and political
conditions,
- political and economic risks associated with operations outside the U.S.,
- the cyclical and volatile price of copper and other metals,
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<PAGE> 96
- unanticipated ground, water, weather or operating conditions or force
majeure events,
- unanticipated ore grade and geological problems or metallurgical and
other processing problems,
- delays in the receipt of or failure to receive necessary government
permits,
- changes in laws or regulations or the interpretation and enforcement
thereof,
- labor relations and accidents, and
- environmental risks.
These and other risk factors are discussed in more detail in this prospectus.
See "Risk Factors" beginning on page 6. Many such factors are beyond our ability
to control or predict. Readers are cautioned not to put undue reliance on
forward-looking statements. We disclaim any intent or obligation to update these
forward-looking statements, whether as a result of new information, future
events or otherwise.
LEGAL MATTERS
The validity of the Phelps Dodge common shares offered hereby will be
passed upon for Phelps Dodge by Debevoise & Plimpton, 875 Third Avenue, New
York, New York.
EXPERTS
The audited consolidated financial statements of Phelps Dodge incorporated
by reference in this Prospectus have been audited by PricewaterhouseCoopers LLP,
independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in auditing and accounting.
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<PAGE> 97
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF PHELPS DODGE CORPORATION
The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers of
Phelps Dodge Corporation are set forth below. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Phelps Dodge and each individual has held such occupation for at least the last
five years. Each director and executive officer listed below is a citizen of the
United States.
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Archie W. Dunham Mr. Dunham has been a Phelps Dodge director since
Conoco, Inc. 1998. He has been Chairman of the Board of Conoco,
600 North Dairy Hartford Road Inc. (integrated energy company) since 1999 and
Houston, TX 77079-1175 President and Chief Executive Officer since January
1996. He was an Executive Vice President of E.I.
duPont de Nemours and Company (chemical materials
and energy company), Conoco's former parent, from
1995 to October 1998. He was a Senior Vice
President -- DuPont Polymers and DuPont Chemicals
and Pigments from 1987 to 1992, and an Executive
Vice President -- Exploration Production of Conoco
from 1992 to 1995. Mr. Dunham is a director of
Conoco Inc. and Louisiana Pacific Corporation. Age
60.
William A. Franke Mr. Franke has been a Phelps Dodge director since
Franke & Company, Inc. 1980. He has been Chairman and Chief Executive
2525 E. Camelback Road Officer of America West Holdings Corporation since
Suite 800 February 1997 and Chairman of the Board of its
Phoenix, AZ 85016 principal subsidiary, America West Airlines, Inc.
(airline carrier) since 1992. He was the
subsidiary's Chief Executive Officer from December
1993 until February 1997, and its President from
May 1996 until February 1997. He has been President
of Franke & Company, Inc., Phoenix, Arizona, an
investment firm, since 1987. He is a director of
America West Holdings Corporation, America West
Airlines, Inc., Central Newspapers, Inc., Beringer
Wine Estates, Mtel Latin America, Inc., AerFi Group
Plc, and the Air Transport Association of America.
Age 62.
Southwood J. Morcott Mr. Morcott has been a Phelps Dodge director since
Dana Corporation 1991. He has been Chairman of the Board of Morcott
4500 Dort St. Dana Corporation (manufacturer and distributor of
Toledo, OH 43615 automotive and vehicular parts) since 1990. From
1987 to 1995, he served as Chairman of Hayes-Dana
Inc. He was Chief Executive Officer of Dana
Corporation from 1989 until February 1999, and
Chief Operating Officer from 1986 until January
1997. He was President of Dana Corporation from
1986 to 1995. Mr. Morcott is a director of Dana
Corporation, CSX Corporation and Johnson Controls,
Inc. Age 61.
</TABLE>
A-1
<PAGE> 98
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
J. Steven Whisler Mr. Whisler has been a Phelps Dodge director since
Phelps Dodge Corporation 1995 and has been Phelps Dodge's President and
2600 North Central Avenue Chief Operating Officer since December 1997, and
Phoenix, AZ 85004-3104 President of Phelps Dodge Mining Company, a
division of Phelps Dodge, from 1991 to October
1998. He was a Senior Vice President of Phelps
Dodge from 1988 to December 1997 and Vice President
of Phelps Dodge from 1987 until 1988. He was
General Counsel of Phelps Dodge from 1987 until
1991. He is a director of Burlington Northern Santa
Fe Corporation and Southern Peru Copper
Corporation. Age 44.
Robert N. Burt Mr. Burt has been a Phelps Dodge director since
FMC Corporation 1993. He has been Chairman of the Board and Chief
200 East Randolph Drive Executive Officer of FMC Corporation (chemicals and
Chicago, IL 60601 machinery for industry, agriculture and government)
since 1991. He is a director of FMC Corporation and
Warner-Lambert Company. Age 61.
Robert D. Krebs Mr. Krebs has been a Phelps Dodge director since
Burlington Northern Santa Fe Corporation 1987. He has been Chairman and Chief Executive
2650 Lou Menk Drive Officer of Burlington Northern Santa Fe Corporation
Fort Worth, TX 76131-2830 (transportation) since June 1, 1999. From April
1997 to May 31, 1999, he was Chairman, President
and Chief Executive Officer of Burlington Northern
Santa Fe Corporation. From September 1995 to April
1997, he was President and Chief Executive Officer
of Burlington Northern Santa Fe Corporation. From
June 1988 to January 1998, he was Chairman,
President and CEO of Santa Fe Pacific Corporation.
He is a director of Burlington Northern Santa Fe
Corporation. Age 57.
Douglas C. Yearley Mr. Yearley has been a Phelps Dodge director since
Phelps Dodge Corporation 1986 and has been Phelps Dodge's Chairman of the
2600 North Central Avenue Board and Chief Executive Officer of the
Phoenix, AZ 85004-3014 Corporation since 1989. He was President of Phelps
Dodge from 1991 until December 1997. He was
President of Phelps Dodge Industries, a division of
Phelps Dodge, from 1988 until 1990, Executive Vice
President of Phelps Dodge from 1987 until 1989 and
Senior Vice President of Phelps Dodge from 1982
through 1986. He is a director of J. P. Morgan &
Co., Incorporated and its principal banking
subsidiary, Morgan Guaranty Trust Company of New
York, Lockheed Martin Corporation, USX Corporation
and Southern Peru Copper Corporation. Age 63.
</TABLE>
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<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Paul Hazen Mr. Hazen has been a Phelps Dodge director since
Wells Fargo Bank 1988. He has been Chairman of Wells Fargo & Co.
420 Montgomery Street since November 1998. He was Chairman and Chief
San Francisco, CA 94104 Executive Officer of Wells Fargo & Co., San
Francisco (bank holding company) and of Wells Fargo
Bank, N.A. (national banking association) from
January 1995 until November 1998. He was President
of Wells Fargo & Co. and of Wells Fargo Bank, N.A.
from 1984 to 1994. He is a director of Wells Fargo
& Co., Safeway, Inc., Shanghai Commercial Bank
Ltd., Vodaphone AirTouch Plc and E. piphany, Inc.
Age 57.
Manuel J. Iraola Mr. Iraola has been a Phelps Dodge director since
Phelps Dodge Corporation 1997 and has been President of Phelps Dodge
2600 North Central Avenue Industries, a division of Phelps Dodge, since 1995,
Phoenix, AZ 85004-3014 and a Senior Vice President of Phelps Dodge since
1995. From 1992 until 1995 he was President of
Phelps Dodge International Corporation. Age 51.
Marie L. Knowles Mrs. Knowles has been a Phelps Dodge director since
ARCO 1994. She has been Executive Vice President and
333 South Hope Street Chief Financial Officer of Atlantic Richfield
Los Angeles, CA 90071 Company (diversified energy company) since 1996.
From 1993 until 1996 she was Senior Vice President
of Atlantic Richfield Company, and President of
ARCO Transportation Company, a former subsidiary of
Atlantic Richfield Company. From 1990 to 1993 she
was Vice President and Controller of Atlantic
Richfield Company. Mrs. Knowles is a director of
Vastar Resources, Inc., URS Corporation and America
West Holdings Corporation. Age 52.
Gordon R. Parker Mr. Parker has been a Phelps Dodge director since
10101 East Dry Creek Road 1995. He was Chairman of Newmont Mining Corporation
Englewood, CO 80112 from 1986 until his retirement in 1994. He was
Chief Executive Officer from 1985 until 1993. Mr.
Parker is a director of Caterpillar, Inc., Gold
Fields of South Africa, Gold Fields Limited and The
Williams Companies, Inc. Age 63.
Ramiro G. Peru Mr. Peru has been Chief Financial Officer of Phelps
Phelps Dodge Corporation Dodge since May 1999 and has been a Senior Vice
2600 North Central Avenue President since 1997. He previously was appointed
Phoenix, AZ 85004-3014 Vice President of Phelps Dodge Mining Company in
1993 and Vice President and Treasurer of Phelps
Dodge in 1995.
</TABLE>
A-3
<PAGE> 100
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Timothy R. Snider Mr. Snider has been a Senior Vice President of
Phelps Dodge Corporation Phelps Dodge since 1998. He is also President of
2600 North Central Avenue Phelps Dodge Mining Company. Before becoming Senior
Phoenix, AZ 85004-3014 Vice President, he was Vice President of Phelps
Dodge, a position he held since 1997. He was Vice
President, Arizona operations, of Phelps Dodge
Mining Company. He previously served as President
of Phelps Dodge Morenci, Inc.
S. David Colton Mr. Colton has been Vice President and General
Phelps Dodge Corporation Counsel of Phelps Dodge since April 1998. Before
2600 North Central Avenue that, he was Vice President and Counsel for Phelps
Phoenix, AZ 85004-3014 Dodge Exploration, a position he held since 1995.
Prior to that time, he was Senior Exploration
Counsel for the exploration and development group
of Phelps Dodge Mining Company.
</TABLE>
A-4
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
With certain limitations, Sections 721 through 726 of the Business
Corporation Law of the State of New York permit a corporation to indemnify any
of its directors or officers made, or threatened to be made, a party to an
action or proceeding by reason of the fact that such person was a director or
officer of such corporation unless a judgment or other final adjudication
adverse to the director or officer establishes that his or her acts were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that he or she
personally gained in fact financial profit or other advantage to which he or she
was not legally entitled.
The By-Laws of the Corporation provide that (a) the Corporation shall
indemnify any person made, or threatened to be made, a party to an action or
proceeding other than one by or in the right of the Corporation to procure a
judgment in its favor, whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any Director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he, his
testator or intestate, is or was a Director or officer of the Corporation, or is
or was serving such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement and expenses (including attorneys' fees)
incurred in connection with such action or proceeding, or any appeal therein,
provided that no indemnification may be made to or on behalf of such person if
(i) his acts were committed in bad faith or were the result of his active and
deliberate dishonesty and were material to such action or proceeding or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
(b) The Corporation shall indemnify any person made, or threatened to be
made, a party to an action by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a Director or officer of the Corporation, or is or was serving at the
request of the Corporation as a Director or officer of any other corporation of
any type or kind, domestic or foreign, or of any partnership, joint venture,
trust, employee benefit plan or other enterprise, against judgments, amounts
paid in settlement and expenses (including attorneys' fees) incurred in
connection with such action, or any appeal therein, provided that no
indemnification may be made to or on behalf of such person if (i) his acts were
committed in bad faith or were the result of his active and deliberate
dishonesty and were material to such action or (ii) he personally gained in fact
a financial profit or other advantage to which he was not legally entitled.
The directors and officers of the Corporation are covered by insurance
policies maintained by the Corporation at its expense insuring the directors and
officers against certain liabilities which might be incurred by them in such
capacities including liabilities arising under the Securities Act of 1933.
On May 4, 1988, the shareholders approved an amendment to the Corporation's
Certificate of Incorporation relating to liability of the directors of the
Corporation by adding the following new Article SEVENTH:
SEVENTH: The personal liability of the Directors of the Corporation
for any breach of duty in such capacity is hereby eliminated and limited to
the fullest extent permitted by Section 402(b) of the New York Business
Corporation Law as the same may be amended from time to time.
Section 402(b) of the Business Corporation Law of the State of New York
referred to in such new Article SEVENTH permits New York corporations to
eliminate or limit the personal liability of directors to the corporation or its
shareholders for damages for any breach of duty in such capacity except
liability (i) of a director (a) whose acts or omissions were in bad faith,
involved intentional misconduct or a knowing violation of law, (b) who
personally gained a financial profit or other advantage to which he or she was
not legally
II-1
<PAGE> 102
entitled or (c) whose acts violated certain other provisions of New York law or
(ii) for acts or omissions prior to May 4, 1988.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
3.1 Complete composite copy of the Restated Certificate of
Incorporation, as amended to date (incorporated by reference
to Exhibit 3.1 to the Corporation's Form 10-Q for the
quarter ended June 30, 1999 (SEC File No. 1-82)).
3.2 By-Laws of the Corporation, as amended effective May 7, 1997
(incorporated by reference to Exhibit 3.2 to the
Corporation's Form 10-Q for the quarter ended June 30, 1997
(SEC File No. 1-82)).
4.1 Reference is made to Exhibits 3.1 and 3.2 above.
4.2 Second Amended and Restated Credit Agreement, dated as of
June 25, 1997, among the Corporation, several banks and
other lending institutions, and The Chase Manhattan Bank, as
administrative agent (incorporated by reference to Exhibit
4.2 to the Corporation's Form 10-Q for the quarter ended
June 30, 1997 (SEC File No. 1-82)).
4.3 Rights Agreement, dated as of February 5, 1998, between the
Corporation and The Chase Manhattan Bank (which replaces the
Rights Agreement dated as of July 29, 1988 as amended and
restated as of December 6, 1989, the rights issued
thereunder having been redeemed by the Corporation), which
includes the form of Certificate of Amendment setting forth
the terms of the Junior Participating Cumulative Preferred
Shares, par value $1.00 per share, as Exhibit A, the form of
Right Certificate as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C (incorporated by
reference to Exhibit 1 to the Corporation's Current Report
on Form 8-K and in the Corporation's Form 8-A, both filed on
February 6, 1998 (SEC File No. 1-82)).
Note: Certain instruments with respect to long-term debt of
the Corporation have not been filed as Exhibits to this
Registration Statement, since the total amount of securities
authorized under any such instrument does not exceed 10
percent of the total assets of the Corporation and its
subsidiaries on a consolidated basis. The Corporation agrees
to furnish a copy of each such instrument upon request of
the Securities and Exchange Commission.
4.4 Form of Indenture, dated as of September 22, 1997, between
the Corporation and The Chase Manhattan Bank, as Trustee
(incorporated by reference to the Corporation's Registration
Statement and Post-Effective Amendment No. 1 on Form S-3
(Registration Nos. 333-36415 and 33-44380)) filed with the
Securities and Exchange Commission on September 25, 1997
(incorporated by reference to Exhibit 4.3 to the
Corporation's Form 10-Q for the quarter ended September 30,
1997 (SEC File No. 1-82)).
4.5 Form of 6.375 percent Note, due November 1, 2004, of the
Corporation issued on November 5, 1997, pursuant to the
Indenture, dated as of September 22, 1997, between the
Corporation and The Chase Manhattan Bank, as Trustee
(incorporated by reference to the Corporation's Current
Report on Form 8-K filed with the Securities and Exchange
Commission on November 3, 1997 and Exhibit 4.4 of Form 10-Q
for the quarter ended September 30, 1997 (SEC File No.
1-82)).
4.6 Form of 7.125 percent Debenture, due November 1, 2027, of
the Corporation issued on November 5, 1997, pursuant to the
Indenture, dated as of September 22, 1997, between the
Corporation and The Chase Manhattan Bank, as Trustee
(incorporated by reference to the Corporation's Current
Report on Form 8-K filed with the Securities and Exchange
Commission on November 3, 1997 and Exhibit 4.5 of the
Corporation's Form 10-Q for the quarter ended September 30,
1997 (SEC File No. 1-82)).
5.1 Opinion of Debevoise & Plimpton.*
8.1 Opinion of Shearman & Sterling.*
</TABLE>
II-2
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.1 The Corporation's 1987 Stock Option and Restricted Stock
Plan (the 1987 Plan), as amended to and including June 3,
1992, and form of Stock Option Agreement and form of Reload
Option Agreement, both as modified through June 3, 1992
(incorporated by reference to Exhibit 10.2 of the
Corporation's Form 10-Q for the quarter ended June 30, 1992
(SEC File No. 1-82)). Form of Restricted Stock letter under
the 1987 Plan (incorporated by reference to Exhibit 10.1 to
the Corporation's 1990 10-K (SEC File No. 1-82)) and the
amendment thereto dated June 25, 1992 (incorporated by
reference to Exhibit 10.2 to the Corporation's 1992 Form
10-K (SEC File No. 1-82)).
10.2 The Corporation's 1989 Directors Stock Option Plan (the 1989
Directors Plan), as amended to and including June 3, 1992,
suspended effective November 6, 1996 (incorporated by
reference to Exhibit 10.3 to the Corporation's Form 10-Q for
the quarter ended June 30, 1992 (SEC File No. 1-82)). Form
of Stock Option Agreement under the 1989 Directors Plan
(incorporated by reference to the Corporation's Registration
Statement on Form S-8 (Reg. No. 33-34363)).
10.3 The Corporation's 1993 Stock Option and Restricted Stock
Plan (the 1993 Plan), as amended through December 1, 1993,
and form of Restricted Stock letter under the 1993 Plan
(incorporated by reference to Exhibit 10.4 to the
Corporation's 1993 Form 10-K (SEC File No. 1-82)). Amendment
to 1993 Plan effective May 7, 1997 (incorporated by
reference to Exhibit 10.15 to the Corporation's Form 10-Q
for the quarter ended June 30, 1997 (SEC File No. 1-82)).
Amended and restated form of Stock Option Agreement, amended
through February 5, 1997 (incorporated by reference to
Exhibit 10.3 of the Corporation's 1997 Form 10-K (SEC File
No. 1-82)). Form of Reload Option Agreement, amended through
November 2, 1994, under the 1993 Plan (incorporated by
reference to Exhibit 10.3 to the Corporation's 1994 Form
10-K (SEC File No. 1-82)).
Note: Omitted from filing pursuant to the Instruction to
Item 601(b) (10) are actual Stock Option Agreements between
the Corporation and certain officers, under the 1987 Plan
and the 1993 Plan, and certain Directors, under the 1989
Directors Plan, which contain substantially similar
provisions to Exhibits 10.1, 10.2 and 10.3 above.
10.4 Description of the Corporation's Incentive Compensation Plan
(incorporated by reference to Exhibit 10.5 to the
Corporation's 1993 Form 10-K (SEC File No. 1-82)).
10.5 Amended and restated Deferred Compensation Plan for the
Directors of the Corporation, dated as of December 3, 1998,
effective January 1, 1999 (incorporated by reference to
Exhibit 10.5 to the Corporation's 1998 Form 10-K (SEC File
No. 1-82)).
10.6 Modified form of Change-of-Control Agreement between the
Corporation and certain executives, including all of the
current executive officers listed in the summary
compensation table to the 1999 Proxy Statement (SEC File No.
1-82) (incorporated by reference to Exhibit 10.6 to the
Corporation's 1998 Form 10-K (SEC File No. 1-82)).
10.7 Amended and restated form of Severance Agreement between the
Corporation and certain executives, including all of the
current executive officers listed in the summary
compensation table to the 1999 Proxy Statement (SEC File No.
1-82) (incorporated by reference to Exhibit 10.7 of the
Corporation's 1997 Form 10-K (SEC File No. 1-82)).
10.8 The Corporation's Retirement Plan for Directors, effective
January 1, 1988, terminated for active directors effective
December 31, 1997 (incorporated by reference to Exhibit
10.13 to the Corporation's 1987 Form 10-K (SEC File No.
1-82)).
10.9 The Corporation's Supplemental Retirement Plan (which
amends, restates and re-names the provisions of the
Corporation's Comprehensive Executive Nonqualified
Retirement and Savings Plan other than the supplemental
savings provisions of such plan), effective (except as
otherwise noted therein) as of January 1, 1997 (incorporated
by reference to Exhibit 10.9 to the Corporation's 1997 Form
10-K (SEC File No. 1-82)). First amendment to Plan,
effective January 1, 1998 (SEC File No. 1-82). Second
amendment to Plan, effective January 1, 1999 (incorporated
by reference to Exhibit 10.9 to the Corporation's Form 10-Q
for the quarter ended June 30, 1999 (SEC File No. 1-82)).
</TABLE>
II-3
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.10 The Corporation's Supplemental Savings Plan (which amends,
restates, and replaces the supplemental savings provisions
of the Corporation's Comprehensive Executive Nonqualified
Retirement and Savings Plan), effective (except as otherwise
noted therein) as of January 1, 1997 (incorporated by
reference to Exhibit 10.10 of the Corporation's 1997 Form
10-K (SEC File No. 1-82)).
10.11 The Corporation's Directors Stock Unit Plan effective
January 1, 1997 (incorporated by reference to Exhibit 10.10
to the Corporation's 1996 Form 10-K (SEC File No. 1-82)) as
amended and restated, effective January 1, 1998
(incorporated by reference to Exhibit 10.11 of the
Corporation's 1997 Form 10-K (SEC File No. 1-82)).
10.12 The Corporation's 1998 Stock Option and Restricted Stock
Plan (the 1998 Plan), forms of Reload Option Agreement and
Restricted Stock Agreement under the 1998 Plan, all
effective March 4, 1998 (incorporated by reference to
Exhibit 10.12 to the Corporation's Form 10-Q for the quarter
ended June 30, 1998 (SEC File No. 1-82)), and form of Stock
Option Agreement, amended through June 22, 1999, under the
1998 Plan (incorporated by reference to the Corporation's
Form 10-Q for the quarter ended June 30, 1999 (SEC File No.
1-82)).
Note: Omitted from filing pursuant to the Instruction to
Item 601(b) (10) are actual Stock Option Agreements between
the Corporation and certain officers, under the 1987 Plan
and the 1993 Plan, and certain Directors, under the 1989
Directors Plan, which contain substantially similar
provisions to Exhibits 10.1, 10.2 and 10.3 above.
10.16 Retirement Agreement dated June 15, 1999, between Thomas M.
St. Clair and the company (incorporated by reference to the
Corporation's Form 10-Q for the quarter ended June 30, 1999
(SEC File No. 1-82)).
15 Letter from PricewaterhouseCoopers LLP, re: unaudited
interim financial information.
21 List of Subsidiaries and Investments.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Debevoise & Plimpton (included in opinion filed
as Exhibit 5.1 hereto).
23.3 Consent of Shearman & Sterling (included in opinion filed as
Exhibit 8.1 hereto).
24 Powers of Attorney (included as part of the signature page
to this Registration Statement).
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Broker Dealer Letter.*
99.4 Form of Letter to Clients.*
99.5 Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.*
</TABLE>
- ---------------
* To be filed by amendment.
II-4
<PAGE> 105
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
II-5
<PAGE> 106
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-6
<PAGE> 107
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PHOENIX,
STATE OF ARIZONA, ON AUGUST 27, 1999.
By: /s/ DOUGLAS C. YEARLEY
------------------------------------
Douglas C. Yearley
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS BELOW
HEREBY AUTHORIZES DOUGLAS C. YEARLEY, J. STEVEN WHISLER, RAMIRO G. PERU AND S.
DAVID COLTON AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION AND REVOCATION,
TO EXECUTE IN THE NAME AND ON BEHALF OF SUCH PERSON ANY AMENDMENT (INCLUDING ANY
POST-EFFECTIVE AMENDMENT) TO THIS REGISTRATION STATEMENT, AND ANY REGISTRATION
STATEMENT RELATING TO THE SAME OFFER AS THIS REGISTRATION STATEMENT THAT IS TO
BE EFFECTIVE UPON FILING PURSUANT TO RULE 462(b) OF THE SECURITIES ACT OF 1933,
AND TO FILE THE SAME, WITH ANY EXHIBITS THERETO AND OTHER DOCUMENTS IN
CONNECTION THEREWITH, MAKING SUCH CHANGES TO THIS REGISTRATION STATEMENT AS THE
REGISTRANT DEEMS APPROPRIATE, AND APPOINTS DOUGLAS C. YEARLEY, J. STEVEN
WHISLER, RAMIRO G. PERU AND S. DAVID COLTON AND EACH OF THEM, WITH FULL POWER OF
SUBSTITUTION AND REVOCATION, ATTORNEY-IN-FACT TO SIGN ANY AMENDMENT (INCLUDING
ANY POST-EFFECTIVE AMENDMENT) TO THIS REGISTRATION STATEMENT, AND ANY SUCH RULE
462(b) REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ANY EXHIBITS THERETO
AND OTHER DOCUMENTS IN CONNECTION THEREWITH, HEREBY RATIFYING AND CONFIRMING ALL
THAT SAID ATTORNEYS-IN-FACT OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- --------- ------------------------ ----
<C> <S> <C>
/s/ DOUGLAS C. YEARLEY Chairman of the Board of Directors and August 27, 1999
- ------------------------------------------ Chief Executive Officer (Principal
Douglas C. Yearley Executive Officer)
/s/ RAMIRO G. PERU Senior Vice President and Chief August 27, 1999
- ------------------------------------------ Financial
Ramiro G. Peru Officer (Principal Financial
Officer)
/s/ GREGORY W. STEVENS Vice President and Controller August 27, 1999
- ------------------------------------------ (Principal Accounting Officer)
Gregory W. Stevens
/s/ DOUGLAS C. YEARLEY Director August 27, 1999
- ------------------------------------------
Douglas C. Yearley
/s/ ROBERT N. BURT Director August 27, 1999
- ------------------------------------------
Robert N. Burt
/s/ ARCHIE W. DUNHAM Director August 27, 1999
- ------------------------------------------
Archie W. Dunham
/s/ WILLIAM A. FRANKE Director August 27, 1999
- ------------------------------------------
William A. Franke
/s/ PAUL HAZEN Director August 27, 1999
- ------------------------------------------
Paul Hazen
</TABLE>
II-7
<PAGE> 108
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- --------- ------------------------ ----
<C> <S> <C>
/s/ MANUEL J. IRAOLA Director August 27, 1999
- ------------------------------------------
Manuel J. Iraola
/s/ MARIE L. KNOWLES Director August 27, 1999
- ------------------------------------------
Marie L. Knowles
/s/ ROBERT D. KREBS Director August 27, 1999
- ------------------------------------------
Robert D. Krebs
/s/ SOUTHWOOD J. MORCOTT Director August 27, 1999
- ------------------------------------------
Southwood J. Morcott
/s/ GORDON R. PARKER Director August 27, 1999
- ------------------------------------------
Gordon R. Parker
/s/ J. STEVEN WHISLER Director August 27, 1999
- ------------------------------------------
J. Steven Whisler
</TABLE>
II-8
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
3.1 Complete composite copy of the Restated Certificate of
Incorporation, as amended to date (incorporated by reference
to Exhibit 3.1 to the Corporation's Form 10-Q for the
quarter ended June 30, 1999 (SEC File No. 1-82)).
3.2 By-Laws of the Corporation, as amended effective May 7, 1997
(incorporated by reference to Exhibit 3.2 to the
Corporation's Form 10-Q for the quarter ended June 30, 1997
(SEC File No. 1-82)).
4.1 Reference is made to Exhibits 3.1 and 3.2 above.
4.2 Second Amended and Restated Credit Agreement, dated as of
June 25, 1997, among the Corporation, several banks and
other lending institutions, and The Chase Manhattan Bank, as
administrative agent (incorporated by reference to Exhibit
4.2 to the Corporation's Form 10-Q for the quarter ended
June 30, 1997 (SEC File No. 1-82)).
4.3 Rights Agreement, dated as of February 5, 1998, between the
Corporation and The Chase Manhattan Bank (which replaces the
Rights Agreement dated as of July 29, 1988 as amended and
restated as of December 6, 1989, the rights issued
thereunder having been redeemed by the Corporation), which
includes the form of Certificate of Amendment setting forth
the terms of the Junior Participating Cumulative Preferred
Shares, par value $1.00 per share, as Exhibit A, the form of
Right Certificate as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C (incorporated by
reference to Exhibit 1 to the Corporation's Current Report
on Form 8-K and in the Corporation's Form 8-A, both filed on
February 6, 1998 (SEC File No. 1-82)).
Note: Certain instruments with respect to long-term debt of
the Corporation have not been filed as Exhibits to this
Registration Statement, since the total amount of securities
authorized under any such instrument does not exceed 10
percent of the total assets of the Corporation and its
subsidiaries on a consolidated basis. The Corporation agrees
to furnish a copy of each such instrument upon request of
the Securities and Exchange Commission.
4.4 Form of Indenture, dated as of September 22, 1997, between
the Corporation and The Chase Manhattan Bank, as Trustee
(incorporated by reference to the Corporation's Registration
Statement and Post-Effective Amendment No. 1 on Form S-3
(Registration Nos. 333-36415 and 33-44380)) filed with the
Securities and Exchange Commission on September 25, 1997
(incorporated by reference to Exhibit 4.3 to the
Corporation's Form 10-Q for the quarter ended September 30,
1997 (SEC File No. 1-82)).
4.5 Form of 6.375 percent Note, due November 1, 2004, of the
Corporation issued on November 5, 1997, pursuant to the
Indenture, dated as of September 22, 1997, between the
Corporation and The Chase Manhattan Bank, as Trustee
(incorporated by reference to the Corporation's Current
Report on Form 8-K filed with the Securities and Exchange
Commission on November 3, 1997 and Exhibit 4.4 of Form 10-Q
for the quarter ended September 30, 1997 (SEC File No.
1-82)).
4.6 Form of 7.125 percent Debenture, due November 1, 2027, of
the Corporation issued on November 5, 1997, pursuant to the
Indenture, dated as of September 22, 1997, between the
Corporation and The Chase Manhattan Bank, as Trustee
(incorporated by reference to the Corporation's Current
Report on Form 8-K filed with the Securities and Exchange
Commission on November 3, 1997 and Exhibit 4.5 of the
Corporation's Form 10-Q for the quarter ended September 30,
1997 (SEC File No. 1-82)).
5.1 Opinion of Debevoise & Plimpton.*
8.1 Opinion of Shearman & Sterling.*
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.1 The Corporation's 1987 Stock Option and Restricted Stock
Plan (the 1987 Plan), as amended to and including June 3,
1992, and form of Stock Option Agreement and form of Reload
Option Agreement, both as modified through June 3, 1992
(incorporated by reference to Exhibit 10.2 of the
Corporation's Form 10-Q for the quarter ended June 30, 1992
(SEC File No. 1-82)). Form of Restricted Stock letter under
the 1987 Plan (incorporated by reference to Exhibit 10.1 to
the Corporation's 1990 10-K (SEC File No. 1-82)) and the
amendment thereto dated June 25, 1992 (incorporated by
reference to Exhibit 10.2 to the Corporation's 1992 Form
10-K (SEC File No. 1-82)).
10.2 The Corporation's 1989 Directors Stock Option Plan (the 1989
Directors Plan), as amended to and including June 3, 1992,
suspended effective November 6, 1996 (incorporated by
reference to Exhibit 10.3 to the Corporation's Form 10-Q for
the quarter ended June 30, 1992 (SEC File No. 1-82)). Form
of Stock Option Agreement under the 1989 Directors Plan
(incorporated by reference to the Corporation's Registration
Statement on Form S-8 (Reg. No. 33-34363)).
10.3 The Corporation's 1993 Stock Option and Restricted Stock
Plan (the 1993 Plan), as amended through December 1, 1993,
and form of Restricted Stock letter under the 1993 Plan
(incorporated by reference to Exhibit 10.4 to the
Corporation's 1993 Form 10-K (SEC File No. 1-82)). Amendment
to 1993 Plan effective May 7, 1997 (incorporated by
reference to Exhibit 10.15 to the Corporation's Form 10-Q
for the quarter ended June 30, 1997 (SEC File No. 1-82)).
Amended and restated form of Stock Option Agreement, amended
through February 5, 1997 (incorporated by reference to
Exhibit 10.3 of the Corporation's 1997 Form 10-K (SEC File
No. 1-82)). Form of Reload Option Agreement, amended through
November 2, 1994, under the 1993 Plan (incorporated by
reference to Exhibit 10.3 to the Corporation's 1994 Form
10-K (SEC File No. 1-82)).
Note: Omitted from filing pursuant to the Instruction to
Item 601(b) (10) are actual Stock Option Agreements between
the Corporation and certain officers, under the 1987 Plan
and the 1993 Plan, and certain Directors, under the 1989
Directors Plan, which contain substantially similar
provisions to Exhibits 10.1, 10.2 and 10.3 above.
10.4 Description of the Corporation's Incentive Compensation Plan
(incorporated by reference to Exhibit 10.5 to the
Corporation's 1993 Form 10-K (SEC File No. 1-82)).
10.5 Amended and restated Deferred Compensation Plan for the
Directors of the Corporation, dated as of December 3, 1998,
effective January 1, 1999 (incorporated by reference to
Exhibit 10.5 to the Corporation's 1998 Form 10-K (SEC File
No. 1-82)).
10.6 Modified form of Change-of-Control Agreement between the
Corporation and certain executives, including all of the
current executive officers listed in the summary
compensation table to the 1999 Proxy Statement (SEC File No.
1-82)(incorporated by reference to Exhibit 10.6 to the
Corporation's 1998 Form 10-K (SEC File No. 1-82)).
10.7 Amended and restated form of Severance Agreement between the
Corporation and certain executives, including all of the
current executive officers listed in the summary
compensation table to the 1999 Proxy Statement (SEC File No.
1-82)(incorporated by reference to Exhibit 10.7 of the
Corporation's 1997 Form 10-K (SEC File No. 1-82)).
10.8 The Corporation's Retirement Plan for Directors, effective
January 1, 1988, terminated for active directors effective
December 31, 1997 (incorporated by reference to Exhibit
10.13 to the Corporation's 1987 Form 10-K (SEC File No.
1-82)).
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.9 The Corporation's Supplemental Retirement Plan (which
amends, restates and re-names the provisions of the
Corporation's Comprehensive Executive Nonqualified
Retirement and Savings Plan other than the supplemental
savings provisions of such plan), effective (except as
otherwise noted therein) as of January 1, 1997 (incorporated
by reference to Exhibit 10.9 to the Corporation's 1997 Form
10-K (SEC File No. 1-82)). First amendment to Plan,
effective January 1, 1998 (SEC File No. 1-82). Second
amendment to Plan, effective January 1, 1999 (incorporated
by reference to Exhibit 10.9 to the Corporation's Form 10-Q
for the quarter ended June 30, 1999 (SEC File No. 1-82)).
10.10 The Corporation's Supplemental Savings Plan (which amends,
restates, and replaces the supplemental savings provisions
of the Corporation's Comprehensive Executive Nonqualified
Retirement and Savings Plan), effective (except as otherwise
noted therein) as of January 1, 1997 (incorporated by
reference to Exhibit 10.10 of the Corporation's 1997 Form
10-K (SEC File No. 1-82)).
10.11 The Corporation's Directors Stock Unit Plan effective
January 1, 1997 (incorporated by reference to Exhibit 10.10
to the Corporation's 1996 Form 10-K (SEC File No. 1-82)) as
amended and restated, effective January 1, 1998
(incorporated by reference to Exhibit 10.11 of the
Corporation's 1997 Form 10-K (SEC File No. 1-82)).
10.12 The Corporation's 1998 Stock Option and Restricted Stock
Plan (the 1998 Plan), forms of Reload Option Agreement and
Restricted Stock Agreement under the 1998 Plan, all
effective March 4, 1998 (incorporated by reference to
Exhibit 10.12 to the Corporation's Form 10-Q for the quarter
ended June 30, 1998 (SEC File No. 1-82)), and form of Stock
Option Agreement, amended through June 22, 1999, under the
1998 Plan (incorporated by reference to the Corporation's
Form 10-Q for the quarter ended June 30, 1999 (SEC File No.
1-82)). Note: Omitted from filing pursuant to the
Instruction to Item 601(b) (10) are actual Stock Option
Agreements between the Corporation and certain officers,
under the 1987 Plan and the 1993 Plan, and certain
Directors, under the 1989 Directors Plan, which contain
substantially similar provisions to Exhibits 10.1, 10.2 and
10.3 above.
10.16 Retirement Agreement dated June 15, 1999, between Thomas M.
St. Clair and the company (incorporated by reference to the
Corporation's Form 10-Q for the quarter ended June 30, 1999
(SEC File No. 1-82)).
15 Letter from PricewaterhouseCoopers LLP, re: unaudited
interim financial information.
21 List of Subsidiaries and Investments.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Debevoise & Plimpton (included in opinion filed
as Exhibit 5.1 hereto).
23.3 Consent of Shearman & Sterling (included in opinion filed as
Exhibit 8.1 hereto).
24 Powers of Attorney (included as part of the signature page
to this Registration Statement).
99.1 Form of Letter of Transmittal. *
99.2 Form of Notice of Guaranteed Delivery. *
99.3 Form of Broker Dealer Letter. *
99.4 Form of Letter to Clients. *
99.5 Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9. *
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
August 25, 1999
Commissioners:
We are aware that our report dated July 12, 1999 on our review of interim
financial information of Phelps Dodge Corporation as of and for the period ended
June 30, 1999 and included in the Company's quarterly report on Form 10-Q for
the quarter then ended is incorporated by reference in its Registration
Statement dated August 27, 1999.
Yours very truly,
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
PricewaterhouseCoopers LLP
<PAGE> 1
PHELPS DODGE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Exhibit 21
LIST OF SUBSIDIARIES AND INVESTMENTS
- ------------------------------------------------------------------------------
Registrant:
Phelps Dodge Corporation (New York). The Registrant has no parent.
<TABLE>
<CAPTION>
<S> <C>
Registrant's
percent of
voting power
--------------
CONSOLIDATED SUBSIDIARIES:
Alambres y Cables de Panama, S.A. (Panama)..................... 78.1
Alambres y Cables Venezolanos, C.A. (Venezuela)................ 90.0
Alcoa Fios E Cabos Electricos, S.A. (Brazil)................... 60.0
Burro Chief Copper Company (Delaware).......................... 100.0
Cables Electricos Ecuatorianos, C.A. (Ecuador)................. 67.1
Cobre Cerrillos Sociedad Anonima (Chile)....................... 90.0
Cocesa Ingenieria y Construccion, S.A. (Chile)................. 63.0
Columbian Carbon Deutschland GmbH (Germany).................... 100.0
Columbian Carbon Europa S.r.l. (Italy)......................... 100.0
Columbian Carbon International (France) S.A. (France).......... 100.0
Columbian Carbon Philippines, Inc. (Philippines)............... 88.2
Columbian Carbon Spain, S.A. (Spain)........................... 100.0
Columbian Chemicals Brasil, S.A. (Brazil)...................... 100.0
Columbian Chemicals Canada Ltd. (Ontario)...................... 100.0
Columbian Chemicals Company (Delaware)......................... 100.0
Columbian Chemicals Europa GmbH (Germany)...................... 100.0
Columbian International Chemicals Corporation (Delaware)....... 100.0
Columbian International Trading Company (Delaware)............. 100.0
Columbian Tiszai Carbon Ltd. (Hungary)......................... 60.0
Columbian (U.K.) Limited (United Kingdom)...................... 100.0
Compania Contractual Minera Candelaria (Chile)................. 80.0
Compania Contractual Minera Ojos del Salado (Chile)............ 100.0
CONDUCEN, S.A. (Costa Rica).................................... 75.4
Conductores Electricos de Centro America, Sociedad Anonima
(El Salvador)................................................ 57.6
Dodge & James Insurance Company, Ltd. (Bermuda)................ 100.0
Electroconductores de Honduras, S.A. de C.V. (Honduras)........ 59.39
Phelps Dodge Magnet Wire (Austria) GmbH (Austria).............. 100.0
Industria de Conductores Electricos, C.A. (Venezuela).......... 87.1
Kalahari Investments Ltd. (Cayman Islands)..................... 100.0
Metals Fabricators of Zambia Limited (Zambia).................. 51.0
PD Candelaria, Inc. (Delaware)................................. 100.0
PD Cobre, Inc. (Delaware)...................................... 100.0
Phelps Dodge Australasia, Inc. (Delaware)...................... 100.0
Phelps Dodge Chino, Inc. (Delaware)............................ 100.0
Phelps Dodge High Performance Conductors of
NJ, Inc. (New Jersey)........................................ 100.0
Phelps Dodge High Performance Conductors of SC and
GA, Inc. (New York).......................................... 100.0
</TABLE>
<PAGE> 2
-2-
<TABLE>
<CAPTION>
Registrant's
percent of
voting power
--------------
<S> <C>
CONSOLIDATED SUBSIDIARIES (CONTINUED):
Phelps Dodge Industries, Inc. (Delaware).................................... 100.0
Phelps Dodge International Corporation (Delaware)........................... 100.0
Phelps Dodge Morenci, Inc. (Delaware)....................................... 100.0
Phelps Dodge Overseas Capital Corporation (Delaware)........................ 100.0
Phelps Dodge Refining Corporation (New York)................................ 100.0
Phelps Dodge Thailand Limited (Thailand).................................... 75.5
Phelps Dodge Wire and Cable Holdings de Mexico, S.A. de C.V. (Mexico)....... 100.0
Phelps Dodge Yantai China Holdings, Inc. (Cayman Islands)................... 66.7
Sevalco Limited (United Kingdom)............................................ 100.0
INVESTMENTS CARRIED ON AN EQUITY BASIS:
Apache Nitrogen Products, Inc. ............................................. 38.7
Columbian Carbon Japan Ltd. (Japan)......................................... 50.0
Keystone Electric Wire and Cable Company Limited (Hong Kong)................ 20.0
Minera Phelps Dodge Mexico, S. de R.L. de C.V. (Mexico)..................... 100.0
PDTL Trading Company Limited (Thailand)..................................... 49.0
Phelps Dodge Philippines, Inc. (Philippines)............................... 40.0
The Morenci Water and Electric Company (Arizona)............................ 100.0
</TABLE>
Summarized financial information is provided for these and other companies (see
Note 4 to the Consolidated Financial Statements of the Corporation contained in
the Corporation's 1998 Form 10-K) pursuant to Article 3 - General Instructions
as to Financial Statements.
Omitted from this listing are subsidiaries which, considered in the aggregate as
a single subsidiary, would not constitute a significant subsidiary.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Phelps Dodge Corporation of our report dated January
14, 1999, relating to the financial statements appearing in Phelps Dodge
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.
We also consent to the incorporation by reference of our report dated January
14, 1999, relating to the financial statement schedule, which appears in such
Annual Report on Form 10-K. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
-------------------------------
PricewaterhouseCoopers LLP
Phoenix, Arizona
August 25, 1999
