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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
Schedule 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
_________________
Cyprus Amax Minerals Company
(Name of Subject Company)
Cyprus Amax Minerals Company
(Name of Person Filing Statement)
Common Stock, No Par Value
(Including the Associated Preferred Share Purchase Rights)
(Title of Class of Securities)
_________________
496902 10 7 (Common Stock)
(CUSIP Number of Class of Securities)
__________________
Philip C. Wolf, Esq.
Senior Vice President, General Counsel and Secretary
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
(303) 643-5000
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person filing statement)
__________________
Copy to:
Elliott V. Stein, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
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Item 1. Security and Subject Company
The name of the subject company is Cyprus Amax Minerals Company, a Delaware
corporation ("Cyprus Amax"), and the principal executive offices of Cyprus Amax
are located at 9100 East Mineral Circle, Englewood, Colorado 80112. The title
of the class of equity securities to which this statement relates is the common
stock, no par value, of Cyprus Amax (including the associated Preferred Share
Purchase Rights) ("Cyprus Amax Common Stock").
Item 2. Tender Offer of the Bidder
This Statement relates to an exchange offer disclosed in a Registration
Statement on Form S-4 initially filed with the Securities and Exchange
Commission on August 27, 1999 and amended on September 1, 1999 and September 2,
1999 (as amended, the "Phelps Dodge Form S-4") by Phelps Dodge Corporation, a
New York corporation ("Phelps Dodge"), to exchange Phelps Dodge common stock,
par value $6.25 per share ("Phelps Dodge Common Stock"), for any and all of the
outstanding shares of Cyprus Amax Common Stock. According to the prospectus
included in the Phelps Dodge Form S-4 (the "Phelps Dodge Prospectus"), Phelps
Dodge is offering, through its wholly-owned subsidiary, CAV Corporation, a
Delaware corporation, and upon the terms and subject to the conditions set forth
in the Phelps Dodge Prospectus and in a related Letter of Transmittal (together,
the "Phelps Dodge Offer"), to exchange shares of Phelps Dodge Common Stock for
each outstanding share of Cyprus Amax Common Stock validly tendered on or prior
to the Expiration Date (as defined in the Phelps Dodge Prospectus) of the Phelps
Dodge Offer and not properly withdrawn. Each such share of Cyprus Amax Common
Stock would be entitled to receive 0.3135 shares of Phelps Dodge Common Stock
(the "Exchange Ratio").
According to the Phelps Dodge Prospectus, Phelps Dodge is making the Phelps
Dodge Offer in order to acquire control of, and ultimately the entire equity
interest in, Cyprus Amax. According to the Phelps Dodge Prospectus, Phelps Dodge
intends, as soon as practicable after consummation of the Phelps Dodge Offer, to
seek to have Cyprus Amax consummate a merger with a wholly owned subsidiary of
Phelps Dodge so that Cyprus Amax would become a wholly owned subsidiary of
Phelps Dodge. According to the Phelps Dodge Prospectus, Phelps Dodge is 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 ("ASARCO").
According to the Phelps Dodge Prospectus, the principal executive offices
of Phelps Dodge are located at 2600 North Central Avenue, Phoenix, Arizona
85004-3014.
Item 3. Identity and Background
(a) The name and business address of Cyprus Amax, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings between
Cyprus Amax or its affiliates and certain of Cyprus Amax's directors and
executive officers ("Compensation Arrangements") are described under the
headings "INTERESTS OF CERTAIN
PERSONS IN THE MERGER -- Cyprus Amax Employment Arrangements," "--Other Cyprus
Amax Plans," "--Indemnification and Insurance," "THE MERGER AGREEMENT -- Stock
Options and Other Stock-Based Awards," "--Benefits Matters," "--
Indemnification; Directors' and Officers' Insurance" and "DIRECTORS AND
MANAGEMENT FOLLOWING THE BUSINESS COMBINATION" at pages 62, 64-66, 72-73 and 79
in the Joint Proxy Statement and Prospectus of Cyprus Amax, ASARCO and Asarco
Cyprus Incorporated ("Asarco Cyprus"), dated August 20, 1999, sent by Cyprus
Amax to its stockholders in connection with Cyprus Amax's special meeting of
stockholders scheduled to be held on September 30, 1999 (the "Joint Proxy
Statement/Prospectus"). Certain other Compensation Arrangements are described
under the heading "INTERESTS OF CERTAIN PERSONS IN THE MERGER" at page 13 in the
Form 8-K of Asarco Cyprus, dated August 20, 1999, sent by Cyprus Amax to its
stockholders in connection with Cyprus Amax's special meeting of stockholders to
be held on September 30, 1999 (the "Asarco Cyprus 8-K"). A copy of such portions
of the Joint Proxy Statement/Prospectus and of the Asarco Cyprus 8-K is filed as
Exhibit 1 hereto and is incorporated herein by reference. Certain other
Compensation Arrangements are described under the headings "CORPORATE GOVERNANCE
AND BOARD OF DIRECTORS -- Director Compensation," "EXECUTIVE COMPENSATION --
Compensation and Benefits Committee Report," "--Compensation Tables," " --
Employment Contracts," and " -- Retirement Plans" at pages 11-22 in the proxy
statement of Cyprus Amax, dated March 12, 1999, sent by Cyprus Amax to its
stockholders in connection with the annual meeting of Cyprus Amax stockholders
held on May 6, 1999 (the "Annual Proxy Statement"). A copy of such portions of
the Annual Proxy Statement is filed as Exhibit 2 hereto and is incorporated
herein by reference.
Except as set forth herein, neither Cyprus Amax nor, to the best of Cyprus
Amax's knowledge, Cyprus Amax's affiliates have any material contract,
agreement, arrangement or understanding or any actual or potential conflict of
interest with (1) its executive officers, directors or other affiliates or (2)
Phelps Dodge, its executive officers, directors or other affiliates.
Item 4. The Solicitation or Recommendation
(a) and (b)
As more fully described below, the Cyprus Amax Board of Directors has
unanimously recommended that Cyprus Amax stockholders reject the Phelps Dodge
Offer and not tender their shares of Cyprus Amax Common Stock pursuant to the
Phelps Dodge Offer. The Cyprus Amax Board of Directors has also unanimously
reaffirmed its determination that the terms of the Merger Agreement between
Cyprus Amax and ASARCO are fair to, and in the best interests of, Cyprus Amax
and its stockholders.
Background. Cyprus Amax, Asarco Cyprus, ACO Acquisition Corp., CAM
Acquisition Corp. and ASARCO entered into an Agreement and Plan of Merger (the
"Merger Agreement") dated as of July 15, 1999. In accordance with the terms and
conditions of the Merger Agreement, the business combination of Cyprus Amax and
ASARCO will occur through two separate mergers with wholly owned subsidiaries of
a new holding company named Asarco Cyprus. After the business combination,
Cyprus Amax and ASARCO will be wholly owned subsidiaries of
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Asarco Cyprus. As a result of the mergers, each share of Cyprus Amax Common
Stock will be converted into 0.765 shares of Asarco Cyprus common stock; each
share of Cyprus Amax preferred stock will be converted into a share of Asarco
Cyprus preferred stock with substantially identical terms, preferences,
limitations, privileges and rights; and each share of ASARCO common stock will
be converted into one share of Asarco Cyprus common stock.
On August 10, 1999, Frank R. McAllister, Chairman of the Board and Chief
Executive Officer of ASARCO, and Milton H. Ward, the Chairman, President and
Chief Executive Officer of Cyprus Amax, each received a telephone call from
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge. In
each call Mr. Yearley said Phelps Dodge wished to proposed a three-way
combination of ASARCO, Cyprus Amax and Phelps Dodge and requested a prompt
meeting to discuss the proposal. Later that day, Messrs. McAllister and Ward
replied to the proposal with a letter saying that their merger agreement
prohibited both ASARCO and Cyprus Amax from discussing a business combination
with any third parties and declining Mr. Yearley's request for a meeting.
On August 11, 1999, Messrs. McAllister and Ward received the following
letter from Phelps Dodge:
"August 11, 1999
"Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
"Mr. 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.
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"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 sizable 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.
"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;
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. 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
downtime;
. 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.
"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/ /s/
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer"
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On August 12, 1999, Messrs. McAllister and Ward telephoned Mr. Yearley in
response to his August 11 letter and reiterated that both ASARCO and Cyprus Amax
were prohibited from discussing a business combination with any third parties
pursuant to the terms of the existing merger agreement.
On August 12, 1999, Messrs. Yearley and J. Steven Whisler, President and
Chief Operating Officer of Phelps Dodge, sent substantially identical letters to
the ASARCO Board of Directors and the Cyprus Amax Board of Directors describing
the proposal outlined in the previous letter to the chief executive officers,
respectively, and asking once again that the Boards of ASARCO and Cyprus Amax
carefully consider the merger proposal and that they authorize the commencement
of negotiations.
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 unanimously
determined that pursuing the Asarco Cyprus transaction was in the best interests
of ASARCO and Cyprus Amax stockholders, respectively, and reconfirmed their
respective recommendations of that transaction.
In the morning of August 20, 1999, Messrs. Ward and McAllister telephoned
Mr. Yearley to tell him that their respective Boards of Directors had declined
to pursue the three-way combination proposal by Phelps Dodge. After Messrs.
Ward and McAllister were unsuccessful in reaching Mr. Yearley, they sent the
following letter:
"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 Board 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.
Sincerely,
/s/ /s/
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Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
Asarco Incorporated Cyprus Amax Minerals
Company"
Subsequently, Cyprus Amax and ASARCO issued the following joint press
release:
"DENVER and NEW YORK August 20, 1999 Cyprus Amax Minerals (NYSE:CYM) and
ASARCO Incorporated (NYSE:AR) announced that they have set shareholder 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,
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expand or develop low cost copper properties and otherwise rationalize
operations to achieve optimum operating levels."
In the afternoon of August 20, 1999, Mr. Yearley and Mr. Whisler conducted
an analysts' conference telephone call during which they announced that Phelps
Dodge planned to offer 0.4098 of a Phelps Dodge share per ASARCO share to ASARCO
stockholders and 0.3135 of a Phelps Dodge share per Cyprus Amax share to Cyprus
Amax stockholders. Late in the evening of August 20, Messrs. Yearley and
Whisler sent the following letter to the Cyprus Amax Board of Directors and a
substantially identical letter to the ASARCO Board of Directors.
"August 20, 1999
"Board of Directors of Cyprus Amax Minerals Company
c/o 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
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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, 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 1,024% 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;
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. 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 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;
. 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.
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"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/ /s/
D.C. Yearley J. Steven Whistler
Chairman and President and
Chief Executive Officer Chief Operating Officer"
On August 23, 1999, the ASARCO Board of Directors and the Cyprus Amax Board
of Directors each met with their respective legal and financial advisors to
consider the August 20 revised unsolicited proposal from Phelps Dodge.
Following discussion between Cyprus Amax and ASARCO, on August 25, 1999,
the Cyprus Amax Board of Directors met with its legal and financial advisors and
approved several items previously discussed with ASARCO as set forth in the
following joint press release issued by ASARCO and Cyprus Amax on August 25,
1999 (the "Revised ASARCO/Cyprus Amax Proposal"):
"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.
"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.
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"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 will
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."
On August 25, 1999, Messrs. Ward and McAllister also sent the following
letter to Mr. Yearley which was attached to the August 25 press release:
"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:
-12-
"We and our respective boards have considered your revised proposal to
acquire our companies. We have the following issues with your proposal:
"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 Cyprus 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,
/s/ /s/
Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
ASARCO Incorporated Cyprus Amax Minerals
Company"
-13-
At its August 25, 1999 meeting, the Cyprus Amax Board of Directors
reconfirmed its recommendation that stockholders vote FOR adoption of the Merger
Agreement.
In approving the Revised ASARCO/Cyprus Amax Proposal and reconfirming its
recommendation to the stockholders, the Cyprus Amax Board of Directors consulted
with its financial and legal advisors and considered a variety of factors,
including the following:
1. The Board of Directors considered the advantages that the business
combination between Cyprus Amax and ASARCO provides to Cyprus Amax and
its stockholders, including that the combined Asarco Cyprus would be a
stronger, more efficient competitor in the copper industry, would have
an improved ability to meet the challenges of low copper prices, would
be better able to benefit and would generate substantial cash flow
during periods of strong copper prices, would be able to lower costs
through increased purchasing power, and would have increased
capitalization.
2. The Board of Directors considered that Merrill Lynch, Pierce, Fenner &
Smith ("Merrill Lynch"), Cyprus Amax's financial advisor, rendered its
oral opinion at the August 25th Board Meeting that, as of such date, the
exchange ratio in the Merger Agreement with ASARCO was fair from a
financial point of view to the stockholders of Cyprus Amax.
3. The Board of Directors considered that the special payment of $5.00 per
share to the stockholders of the combined Asarco Cyprus would enable
stockholders to receive an immediate and significant cash benefit from
the merger, while leaving the combined company with a strong balance
sheet and sufficient liquidity.
4. The Board of Directors considered that the Revised ASARCO/Cyprus Amax
Proposal allows Cyprus Amax to continue to pursue the business
combination with ASARCO on a basis that does not preclude Phelps Dodge
(or any other potential merger partner) from subsequently completing a
business combination with the combined company, while preserving the
opportunity for stockholders to realize the benefits of the merger with
ASARCO, even if Phelps Dodge determines not to pursue its proposal.
5. The Board of Directors considered the fact that the business combination
with ASARCO is the subject of a definitive agreement, as well as the
terms and conditions of the merger agreement, whereas the Phelps Dodge
proposal is highly contingent and no form of contract has been
proposed.
6. The Board considered that the Phelps Dodge proposal does not pay Cyprus
Amax stockholders a sufficient price to reflect the contribution of
Cyprus Amax to a three-way combination of Cyprus Amax, ASARCO and Phelps
Dodge.
-14-
7. The Board of Directors considered that the joint Cyprus Amax/ASARCO
letter to Phelps Dodge dated August 25, 1999, provided stockholders the
opportunity to accept a transaction involving Cyprus Amax, ASARCO and
Phelps Dodge if Phelps Dodge was willing to provide certain assurances
as to the terms of its proposal and to pay Cyprus Amax stockholders a
sufficient price to reflect the contribution of Cyprus Amax to a three-
way combination of Cyprus Amax, ASARCO and Phelps Dodge.
On August 25, 1999, Phelps Dodge issued the following press release:
"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.'
"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:
"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.
-15-
"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.'"
On August 27, 1999, Phelps Dodge sent the following letter to Cyprus Amax
and ASARCO:
"August 27, 1999
"Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
"Mr. 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 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.
-16-
"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:
-17-
`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 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,
/s/ /s/
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer"
On August 27, 1999, Phelps Dodge announced that it intended to commence an
unsolicited exchange offer for all outstanding shares of Cyprus Amax Common
Stock and all outstanding shares of common stock of ASARCO.
At a meeting held on September 1, 1999, the Cyprus Amax Board reviewed the
terms of the Phelps Dodge Offer with its legal and financial advisors. At that
same meeting, the Cyprus Amax Board adopted a resolution that postponed the
distribution of rights certificates under the Cyprus Amax Shareholder Rights
Plan as a result of Phelps Dodge's announcement of its
-18-
intention to commence an exchange offer until such later date as determined by
the Cyprus Amax Board.
On September 3, 1999, Phelps Dodge filed a tender offer statement on
Schedule 14D-1 with the Securities and Exchange Commission. On September 7,
1999, Phelps Dodge filed a definitive proxy statement with the Securities and
Exchange Commission to solicit proxies from Cyprus Amax stockholders in
opposition to the approval and adoption of the Merger Agreement.
At a meeting held on September 8, 1999, the Cyprus Amax Board determined by
a unanimous vote that the Phelps Dodge Offer is not in the best interests of
Cyprus Amax and its stockholders. Accordingly, the Cyprus Amax Board
recommended that Cyprus Amax stockholders reject the Phelps Dodge Offer and not
tender their shares. The Cyprus Amax Board of Directors also unanimously
reaffirmed its determination that the terms of the Merger Agreement between
Cyprus Amax and ASARCO are fair to, and in the best interests of, Cyprus Amax
and its stockholders. Cyprus Amax's press release and letter to stockholders
with respect to the Cyprus Amax Board's recommendation are attached hereto as
Exhibits 3 and 4 respectively, and are incorporated herein by reference.
The Recommendation. The Cyprus Amax Board resolved to recommend against
the Phelps Dodge Offer because the Cyprus Amax Board did not find the Phelps
Dodge Offer to be in the best interests of Cyprus Amax and its stockholders. In
making this determination, the Cyprus Amax Board considered the following
factors, among others:
1. The Board considered the value stockholders would receive in the Asarco
Cyprus Merger and the fact that the stockholders of Cyprus Amax would
receive 63.5% of the equity of the combined company, including their
proportionate share of the value created by $275 million of annual
synergies made possible by combining the two companies.
2. The Board considered the terms of the Phelps Dodge Offer and the implied
value the Phelps Dodge Offer would deliver to Cyprus Amax stockholders
in the event that Phelps Dodge acquired both Asarco and Cyprus Amax
pursuant to the terms of the Phelps Dodge Offer. In addition, because
the Phelps Dodge Offer is not conditioned on the completion of Phelps
Dodge's offer for ASARCO, the Board also considered the implied value
the Phelps Dodge Offer would deliver to Cyprus Amax stockholders in the
event that Phelps Dodge acquired Cyprus Amax, but not ASARCO. In both
cases, the Board concluded that the Phelps Dodge Offer is inadequate.
The Board concluded that the ownership proposed by Phelps Dodge for the
Cyprus Amax stockholders in a combined Phelps Dodge/ASARCO/Cyprus Amax
did not fairly compensate Cyprus Amax stockholders for their relative
contribution to the new company.
3. The Board considered the oral opinion of its financial advisor, Merrill
Lynch, that the consideration offered to Cyprus Amax stockholders
pursuant
-19-
to the Phelps Dodge Offer is inadequate to such stockholders
from a financial point of view.
4. The Board considered that the terms of the Phelps Dodge Offer were such
that Phelps Dodge could, if it wished, increase the exchange ratio
substantially without incurring any dilution of its earnings, and thus
concluded that Phelps Dodge could afford to offer a substantially
improved exchange ratio if it was sincere in wishing to make an offer
that would be attractive to Cyprus Amax stockholders.
5. The Board considered that the Phelps Dodge Offer raises substantial
issues under the antitrust laws. In this respect, the Board noted that
although Phelps Dodge has had the ability to make the required
regulatory filings with respect to its proposed transaction since it
publicly stated its intention to commence the exchange offer for Cyprus
Amax Common Stock on August 27, 1999, Phelps Dodge has not done so and
the applicable 30-day waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), will not
commence until it does.
6. The Board considered that although Phelps Dodge stated that it was
prepared to enter into a merger agreement with substantially the same
representations, warranties and covenants as those contained in the
Merger Agreement, Phelps Dodge has not provided to Cyprus Amax and
Asarco its proposed form of agreement. In addition, although Phelps
Dodge stated that it was willing to give "strong contractual assurances"
on antitrust issues, Phelps Dodge has not made any specific commitments
on this point. In light of these concerns, the Board concluded that
there remained substantial uncertainty as to the timing of the
completion of any Phelps Dodge acquisition of Cyprus Amax or its
securities.
7. The Board of Directors considered the advantages that the business
combination between Cyprus Amax and ASARCO provides to Cyprus Amax and
its stockholders, including that the combined Asarco Cyprus would be a
stronger, more efficient competitor in the copper industry, would have
an improved ability to meet the challenges of low copper prices, would
be better able to benefit and would generate substantial cash flow
during periods of strong copper prices, would be able to lower costs
through increased purchasing power, and would have increased
capitalization.
8. The Board of Directors considered that Merrill Lynch, Cyprus Amax's
financial advisor, orally reconfirmed its opinion at the September 8th
Board Meeting that, as of such date, the exchange ratio in the Merger
Agreement with ASARCO was fair from a financial point of view to the
stockholders of Cyprus Amax.
-20-
9. The Board of Directors considered that the special payment of $5.00 per
share to the stockholders of the combined Asarco Cyprus would enable
stockholders to receive an immediate and significant cash benefit from
the merger, while leaving the combined company with a strong balance
sheet and sufficient liquidity.
10. The Board of Directors considered that the Revised ASARCO/Cyprus Amax
Proposal allows Cyprus Amax to continue to pursue the business
combination with ASARCO on a basis that does not preclude Phelps Dodge
(or any other potential merger partner) from subsequently completing a
business combination with the combined company, while preserving the
opportunity for stockholders to realize the benefits of the merger with
ASARCO.
11. The Board of Directors considered the fact that the business combination
with ASARCO is the subject of a definitive agreement, as well as the
terms and conditions of the merger agreement, whereas the Phelps Dodge
Offer is subject to many conditions and no form of contract has been
proposed. The Board accordingly considered the risk that Phelps Dodge
would not prove willing or able to consummate its offer on mutually
acceptable non-financial terms.
12. The Board of Directors considered that the joint Cyprus Amax/ASARCO
letter to Phelps Dodge dated August 25, 1999, provided stockholders the
opportunity to accept a transaction involving Cyprus Amax, ASARCO and
Phelps Dodge if Phelps Dodge was willing to provide certain assurances
as to the terms of its proposal and to pay Cyprus Amax stockholders a
price that adequately reflected the contribution of Cyprus Amax to a
three-way combination of Cyprus Amax, ASARCO and Phelps Dodge.
The foregoing discussion of the information and factors considered by the
Cyprus Amax Board of Directors is not intended to be exhaustive but includes all
material factors considered by the Board. The Cyprus Amax Board of Directors
did not assign relative weights to the foregoing factors or determine that any
factor was of particular importance, and individual directors may have given
differing weights to different factors. Rather, the Board viewed its position
and recommendation as being based on the totality of the information presented
to and considered by it.
Item 5. Persons Retained, Employed or to be Compensated
Cyprus Amax has retained Merrill Lynch to render financial advisory
services to Cyprus Amax in connection with the Mergers and the Phelps Dodge
Offer. Pursuant to the terms of a letter agreement between Cyprus Amax and
Merrill Lynch dated July 17, 1999, Cyprus Amax has agreed to pay Merrill Lynch
$4.7 million for its financial advisory services upon the consummation of the
business combination with ASARCO. For additional services in connection with
the Phelps Dodge Offer, Merrill Lynch will be paid additional fees in amounts to
be mutually agreed upon. Cyprus Amax has also agreed to reimburse Merrill Lynch
for its reasonable
-21-
out-of-pocket expenses, including the reasonable fees and disbursements of legal
counsel, and to indemnify Merrill Lynch and certain related parties from and
against certain liabilities, including liabilities under the federal securities
laws, arising out of its engagement.
Cyprus Amax has retained Georgeson Shareholder Communications Inc. and
MacKenzie Partners, Inc. to assist Cyprus Amax in its solicitation of proxies in
connection with the Mergers and to assist Cyprus Amax in connection with its
communications with its stockholders with respect to, and to provide other
services to Cyprus Amax in connection with, the Mergers and the Phelps Dodge
Offer. Such firms will receive reasonable and customary compensation for their
services and will be reimbursed for their out-of-pocket expenses in connection
therewith. Cyprus Amax has agreed to indemnify such firms against certain
liabilities arising out of or in connection with their engagement.
Except as set forth above, neither Cyprus Amax nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to stockholders with respect to the Mergers or the Phelps Dodge
Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) Except as described below, to the best knowledge of Cyprus Amax, there
have been no transactions in shares of Cyprus Amax Common Stock which were
effected during the past 60 days by Cyprus Amax or any executive officer,
director, affiliate or subsidiary of Cyprus Amax.
The following executive officers of Cyprus Amax purchased shares of Cyprus
Amax Common Stock in the last 60 days pursuant to the Cyprus Amax Minerals
Company Savings Plan and Trust: Jeffrey G. Clevenger (123 shares); Farokh S.
Hakimi (102 shares); Robin J. Hickson (131 shares); Gerald J. Malys (136
shares); John Taraba (139 shares); Milton H. Ward (11 shares); David H. Watkins
(127 shares) and Philip C. Wolf (166 shares).
(b) To the best knowledge of Cyprus Amax, none of its executive officers,
directors, affiliates or subsidiaries presently intends to tender shares of
Cyprus Amax Common Stock to Phelps Dodge pursuant to the Phelps Dodge Offer or
to sell any shares of Cyprus Amax Common Stock that are owned beneficially or
held of record by such persons.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) and (b).
Except as described herein, Cyprus Amax is not engaged in any negotiation in
response to the Phelps Dodge Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving Cyprus
Amax or any of its subsidiaries, (ii) a purchase, sale or transfer of a material
amount of assets of Cyprus Amax or any of its subsidiaries, (iii) a tender offer
for or other acquisition of securities by or of Cyprus Amax or (iv) a material
change in the present capitalization or dividend policy of Cyprus Amax.
-22-
Item 8. Additional Information to be Furnished
Cyprus Amax and its directors have been named as defendants in five
purported class actions commenced in the Court of Chancery, County of New
Castle, State of Delaware. ASARCO has been named as a defendant in one of the
actions as aiding and abetting the other defendants in the alleged breach of
their fiduciary duty. The plaintiffs in these lawsuits, who are purported
stockholders of Cyprus Amax, allege that: defendants have a legal duty to
negotiate with Phelps Dodge; that the Phelps Dodge proposal is more attractive
than the ASARCO-Cyprus Amax business combination; and the defendants should
conduct a negotiating or sale process in which Cyprus Amax would accept the
highest consideration available. The complaints allege that the individual
defendants have breached their fiduciary duties to the stockholders of Cyprus
Amax in negotiating the ASARCO-Cyprus Amax business combination, and
specifically by agreeing to a provision in the Merger Agreement that prohibits
Cyprus Amax at certain times from negotiating with or supplying information to
third parties such as Phelps Dodge. The plaintiffs further allege that
defendants breached their duties in connection with setting the record date for
the Cyprus Amax special meeting. As relief, the complaints seek, among other
things, damages in an unspecified amount, injunctive relief prohibiting
consummation of the ASARCO-Cyprus Amax business combination, and an order
requiring Cyprus Amax to negotiate with bidders and/or sell itself to the
highest bidder. The time for defendants to answer or respond to the complaints
has not yet elapsed. Cyprus Amax believes that the claims alleged in the
complaints are without merit.
Cyprus Amax and its directors, along with ASARCO, are named as defendants
in an action commenced by Phelps Dodge in the Court of Chancery in and for New
Castle County, State of Delaware (the "Phelps Action"). Phelps Dodge Corp. v.
------------------
Cyprus Amax Mineral Company, No. 17398. The complaint in the Phelps Action
- -----------------------------
alleges, among other things, that the directors breached their duties to the
stockholders of Cyprus Amax by entering into the Merger Agreement with ASARCO,
and in particular by agreeing to certain restrictions, commonly referred to as a
"no-shop" clause, on Cyprus Amax's ability to solicit or negotiate proposals by
third parties for the acquisition of Cyprus Amax or a merger with Cyprus Amax,
during certain periods of time as set forth in the Merger Agreement. In
addition, the complaint in the Phelps Action alleges that the director
defendants breached their duties to the stockholders of Cyprus Amax by agreeing
to certain termination fee provisions in the Merger Agreement; by failing to
submit the Phelps Dodge Offer to the stockholders of Cyprus Amax for approval;
by failing to determine that the Phelps Dodge Offer is in the best interests of
the stockholders of Cyprus Amax; and by failing to exempt Phelps Dodge from the
operation of Section 203 of the Delaware General Corporation Law (the "DGCL")
and Cyprus Amax's Shareholder Rights Plan. The complaint names ASARCO as an
aider and abettor of the alleged breaches complained of. As relief, the
complaint in the Phelps Action seeks, among other things, an injunction
preventing the Asarco Cyprus Merger from being consummated regardless of the
vote of stockholders; a declaration that the defendants are required to "obtain
information about" alternatives to the Asarco Cyprus Merger and that the
defendants are required to determine that "the Phelps Dodge proposal is in the
best interest of Cyprus Amax's shareholders." The complaint further seeks an
order compelling the defendants to submit the Phelps proposal to the
stockholders of Cyprus Amax, and to make Section 203 of the DGCL and Cyprus
Amax's Shareholder Rights Plan inapplicable to the Phelps
-23-
Dodge Offer. Cyprus Amax and the director defendants believe that the
allegations of the complaint are without merit and intend to vigorously oppose
the relief sought in the complaint.
The Court of Chancery has scheduled a hearing on September 27, 1999 to
consider a motion by Phelps Dodge for a preliminary injunction to enjoin
consummation of the Asarco Cyprus Merger and to enjoin the application of the
"no shop" and termination fee clauses in the Asarco Cyprus Merger Agreement.
Cyprus Amax has been named as a defendant in an action commenced in the
Court of Chancery, County of Mercer, State of New Jersey in which Phelps Dodge
has alleged that ASARCO and its directors breached their duties to the
stockholders of ASARCO in connection with the Asarco Cyprus Merger. The
allegations of the complaint, and the relief sought, are substantially similar
to the allegations in the Delaware action described above, except that the New
Jersey complaint is directed against ASARCO and its directors and names Cyprus
Amax only as an alleged aider and abettor. Cyprus Amax has been informed that
the New Jersey court has granted a motion by ASARCO to stay the proceedings in
the New Jersey action, and expects that some or all of the claims asserted in
that action may be asserted by Phelps Dodge in the Delaware court.
Item 9. Material to be Filed as Exhibits
Exhibit 1: Pages 62, 64-66, 72-73 and 79 in the Joint Proxy
Statement/Prospectus and page 13 in the Asarco Cyprus 8-K.
Exhibit 2: Pages 11-22 in the Annual Proxy Statement.
Exhibit 3: Press release issued by Cyprus Amax and Asarco, dated September
9, 1999.
Exhibit 4: Letter to Stockholders of Cyprus Amax, dated September 9, 1999.*
Exhibit 5: Complaint filed in Phelps Dodge v. ASARCO et al., Superior Court
of New Jersey Chancery Division: Mercer County, August 27, 1999.
Exhibit 6: Complaint filed in Sterns v. McAllister et al., Superior Court
of New Jersey Chancery Division: Mercer County, August 24, 1999.
Exhibit 7: Complaint filed in Greenfield v. Osborne, et al., Superior Court
of New Jersey Chancery Division: Mercer County, August 25, 1999.
Exhibit 8: Complaint filed in Steiner v. Cyprus Amax et al., Court of
Chancery of the State of Delaware in and for New Castle County,
August 23, 1999.
Exhibit 9: Complaint filed in Miller v. Cyprus Amax et al., Court of
Chancery of the State of Delaware in and for New Castle County,
August 23, 1999.
Exhibit 10: Complaint filed in Bruno v. Stookey et al., Court of Chancery of
the State of Delaware in and for New Castle County, August 24,
1999.
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Exhibit 11: Complaint filed in Green v. Stookey et al., Court of Chancery of
the State of Delaware in and for New Castle County, August 24,
1999.
Exhibit 12: Complaint filed in Lifshitz v. Stookey et al., Court of Chancery
of the State of Delaware in and for New Castle County, August
24, 1999.
Exhibit 13: Complaint filed in Klotz v. Ward et al., Court of Chancery of
the State of Delaware in and for New Castle County, August 24,
1999.
Exhibit 14: Complaint filed in Grill v. Stookey, et al., Court of Chancery
of the State of Delaware in and for New Castle County, August
26, 1999.
Exhibit 15: Complaint filed in Phelps Dodge v.Cyprus Amax, et al. Court of
Chancery for the State of Delaware in and for New Castle County,
August 27, 1999.
_________________
* Included with Schedule 14D-9 mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
CYPRUS AMAX MINERALS COMPANY
By:
/s/ Philip C. Wolf
----------------------------------
Philip C. Wolf
Senior Vice President,
General Counsel and Secretary
Dated: September 9, 1999
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