Phelps Dodge Gets Bought

Updated from 8:15 p.m. EST

Just a few months after its own mega-merger fell apart, copper giant Phelps Dodge(PD Quote) has hoisted the white flag and agreed to be acquired in a deal valued at $26 billion.

Freeport-McMoRan(FCX Quote) late Sunday announced it was buying the Phoenix-based copper miner in a deal that represents a 33% premium to Phelps' Friday closing price of $95.02.

In the deal, New Orleans-based Freeport-McMoRan says it will pay $126.46 a share for Phelps. Freeport-McMoRan is a big gold, copper and silver mining and manufacturing firm. Each Phelps Dodge shareholder will receive $88 a share in cash plus 0.67 of a common share of Freeport-McMoRan shares.

The deal to acquire Phelps is a big reward to long-term shareholders of the copper giant who had opposed the company's earlier three-way $40 million merger with two Canadian nickel miners, Inco and Falconbridge. After that deal fell apart, many on Wall Street had predicted that Phelps would wind up being acquired.

In fact, one of Phelps' largest shareholders, the $12 billion hedge fund Atticus Capital, said in October it was actively trying to find a buyer for the copper miner. At last count, New York-based Atticus owned about 10% of Phelp's stock.

Earlier this year, Atticus had been pushing Phelps' management for a big share buyback as a way of boosting shareholder value. Phelps' management had resisted that call.

This year, Atticus, which manages six different funds, is up about 27%, say people familiar with the fund. The hedge fund has earned a reputation for taking outsized equity stakes in companies and agitating for buybacks or corporate mergers.