NEW YORK (HedgeWorld.com)--Atticus Management LLC informed the management of Phelps Dodge Corp., Phoenix, in a letter Wednesday [Feb. 15] that it won't accept a seat on the Phelps Dodge board of directors.
Atticus contends that Phelps Dodge, a smelter and refiner of non-ferrous metals, has too much cash on its balance sheet, and that it ought to give some of this back to the shareholders.
"The recent dividends have not gone far enough to address the company's bloated balance sheet," said Atticus' chairman, Timothy R. Barakett, and its vice chairman, David Slager, in the letter addressed to Phelps Dodge chairman, J. Steven Whisler.
Messrs. Barakett and Slager said that they would prefer to be outside the (12 member) board, where they can continue to be a more effective voice for shareholder interests than they could be with one seat on the inside. The letter also criticized the incumbent board members for a failure to put their own money where their execution is. It said that the members "neither own a significant investment in Phelps Dodge nor have to date shown any great interest in engaging with us ..."
Phelps Dodge replied, in its own Feb. 15 filing with the Securities and Exchange Commission, that Atticus has mischaracterized recent discussions between the hedge fund manager and the smelter. Atticus has, the company said, demanded that the smelter impose a substantial debt burden upon itself at a point in the metals-pricing cycle where such a move would be a "reckless bet that could threaten our company's future."
Mr. Whisler agrees with Atticus that Phelps Dodge ought to make payouts to its investors. Last October, he noted, the board authorized a shareholder capital return program of more than US$900 million through special dividends. It would like to return another US$600 million or more by the end of 2006, "but we will do so only as our actual results justify it," he said.
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