Atticus Capital LLC, the second-largest shareholder of Phelps Dodge Corp., plans to vote against the mining company's bid to acquire Inco Ltd. and Falconbridge Ltd. in the industry's biggest takeover ever.
Atticus, a New York-based hedge fund, ``intends to vote down this deal and would be surprised if other shareholders didn't reach the same conclusion,'' spokesman Robert Coburn said today in an interview. Atticus ``continues to believe a return of capital is the best option for Phelps Dodge,'' he said.
Phoenix-based Phelps, the world's third-largest copper producer, increased its bid for Toronto-based nickel producers Inco and Falconbridge on July 16. Phelps has 203 million shares outstanding and needs supporting votes representing more than half of that total to close the deal.
Atticus has about 8 percent of Phelps Dodge shares and controls an additional 1.9 percent in options, Coburn said. Atticus has said Phelps should return to shareholders more of the cash surplus the company built up during a four-year rally in copper prices. The hedge fund said on June 29 it is ``not convinced of the merits'' of the Inco and Falconbridge acquisitions.
Phelps Chief Executive Officer Steven Whisler says the company needs to acquire Inco and Falconbridge to join the ranks of world's top mine owners. Phelps plans to take on $19 billion in debt to fund the C$43.5 billion ($38.3 billion) in acquisitions.
The Atticus position ``does not surprise us at all,'' Whisler said today in a statement. ``Atticus has consistently recommended short-term strategies based on their own objectives.''
Since November, Phelps has paid $1.3 billion in special dividends.
Atticus, which manages more than $11 billion, was among the hedge funds that blocked Deutsche Boerse AG's bid for London Stock Exchange Plc.
Phelps Dodge surged $3.77, or 4.9 percent, to $81.03 in New York Stock Exchange composite trading. The gain was triggered by speculation investors will back mining rival Xstrata Plc (XTA)'s bid for Falconbridge. Inco jumped C$2.35, or 3.1 percent, to C$79.29 on the Toronto Stock Exchange, and Falconbridge rose C$1.34, or 2.2 percent, to C$63.38.
``We are absolutely convinced that shareholders are going to support this transaction,'' Whisler said on a July 17 conference call with investors and analysts. ``That's certainly the indication that I have received from the shareholders that I've spoken to. It is clear that many of our longer-term investors understand both the financial and strategic rationale of the transaction.''
Barclays Global Investors UK is Phelps's largest shareholder with 8.4 percent as of March 31, according to filings with the U.S. Securities and Exchange Commission.
Inco's bid ``is the only proposal that allows Falconbridge shareholders to participate in the enormous synergies and upside available by combining these three companies,'' Whisler said today in the statement. ``This is the best and final proposal for Falconbridge that we will support.''
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