North Is Proving Frosty for Phelps Dodge

In conjunction with the merger, Phelps Dodge says it now plans to spend $5 billion on a stock buyback, a move the company might be doing with on eye on appeasing Atticus.

Ironically, Phelps Dodge had rebuffed Atticus' earlier calls for a buyback by saying the hedge fund's demand that it finance the buyback with debt was "reckless.'' In a Feb. 15 press release, Phelps Dodge's CEO said: "We believe their demand to add a substantial debt burden to Phelps Dodge at this point in the metal-pricing cycle to fund an additional stock buyback program represents a reckless bet that could threaten our company's future.''

Critics, however, note that in paying for the three-way merger and the $5 billion stock buyback, Phelps Dodge will be increasing its debt burden by $22 billion.

Soon after the deal was announced, credit-rating agencies Fitch Ratings and Moody's Investor Services placed the company under review for a possible downgrade of its corporate debt. Moody's says given that the deal will be "funded by a significant amount of new debt,'' it is "concerned about the combined company's financial position should metals prices retreat from their currently very high level.''

Whisler has said in various interviews that the debt load would be paid off quickly, mostly because of rising metals prices.

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