Atticus Capital is trying to line up a buyer for Phelps Dodge( PD), the big copper miner.
The huge hedge fund, which now owns about 10% of Phelps Dodge, says it has met with an investment bank and "several potential investors" to discuss a possible acquisition of Phelps. Atticus disclosed the meetings in a regulatory filing on Wednesday. Shares of Phelps surged 4%.
The hedge fund, which has long pushed Phelps management to either sell the company or buy back shares, says some of the potential suitors include "private equity firms and strategic buyers."
Atticus, a $12 billion hedge fund led by Timothy Barakett, now ranks as Phelps' largest shareholder. For nearly a year now, the New York-based fund has been a thorn in the side of Phelps' management, agitating for a series of moves to boost shareholder value.
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.
A hedge fund spokesman did not return a telephone call.
Atticus played a leading role in helping to spur investor opposition to Phelps' ill-fated three-way $40 billion merger with two Canadian nickel mining companies,
( FAL). After the complex deal fell apart this summer, many predicted that Phelps could soon find itself in play.
The news that Atticus is trying to put Phelps in play comes at a time of frenzied merger activity in the metals sector. Another thing that complicated Phelps' three-way deal is that there were rival suitors for both Inco and Falconbridge.
Phelps, which has 15,000 employees, has a market cap of $18 billion and little debt.
Private equity firms have raised a record amount of money this year and have pulled off a number of mega-mergers. Phelps' relatively clean balance sheet could make it an attractive candidate for the buyout crowd. But the firm has had inconsistent cash flows and that could scare away some potential private equity buyers.
Private equity firms typically target companies that they perceive as undervalued and in need of a restructuring. After taking a company public, they try to overhaul it and then cash-out down the road either through an IPO, or a subsequent sale.
A person familiar with Phelps says potential industry buyers could include Britain's
( RTP) and Australia's
Phelps surged $3.17 to $90.94.