There are more signs of trouble for Phelps Dodge's ( PD) ambitious $40 billion megadeal to acquire two Canadian nickel miners.The Phoenix-based copper miner recently canceled a meeting with a group of Wall Street metals and commodities analysts in New York. People familiar with Phelps Dodge say the meeting was a canceled to allow top executives at the copper company to spend more time on the road selling the merger to an ever-growing crowd of skeptical institutional investors. A Phelps Dodge spokesman could not be reached for comment. Phelps Dodge is seen as facing an uphill struggle in convincing investors that the complicated three-way merger with nickel miners Inco ( N) and Falconbridge ( FAL) is a smart move. A number of Wall Street analysts, none of whom wanted to be identified, say the deal is meeting with a lot resistance from institutional investors and added that Phelps Dodge executives have their work cut out for them. Two big institutional investors, hedge fund behemoth Atticus Management and Lehman Brothers' ( LEH) Neuberger Berman $2.1 billion Partners Fund, already are on record criticizing the deal, saying it is too dilutive to Phelps Dodge's earnings. Sources say other institutional investors may begin publicly expressing their displeasure with the megamerger over the next few weeks. News of the cancellation of the analyst meeting, meanwhile, comes as another mining company is throwing a potential obstacle into the three-way combination. Swiss-based Xstrata on Tuesday upped its hostile all-cash offer for Falconbridge by 12% to $16.2 billion. The move by Xstrata, which already owns 20% of Falconbridge, is seen as putting pressure on Inco and Phelps Dodge to respond in kind. In the proposed three-way deal, Phelps Dodge would gobble up Inco, after it first buys Falconbridge. The cash-and-stock deal would deliver a 22% premium to Inco shareholders.