1
EXHIBIT 28
September 30, 1999
Board of Directors
Cyprus Amax Minerals Company
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Members of the Board of Directors:
Cyprus Amax Minerals Company (the "Company"), Xxxxxx Dodge Corporation (the
"Acquiror") and CAV Corporation, a newly formed, wholly owned subsidiary of the
Acquiror (the "Acquisition Sub"), propose to enter into the Agreement and Plan
of Merger among Xxxxxx Dodge Corporation, CAV Corporation and Cyprus Amax
Minerals Company (the "Agreement") pursuant to which (i) the Acquisition Sub
would commence an exchange offer (the "Offer") for all outstanding shares of
common stock, no par value, of the Company (the "Company Shares") for either, at
the election of the stockholder, (x) 0.3500 of a share of common stock, $6.25
par value, of the Acquiror (the "Acquiror Shares") or (y) $20.54 per share, net
to the seller in cash, without interest, each subject to the election and
proration provisions of the Agreement (the "Offer Consideration") and (ii) the
Acquisition Sub would be merged with the Company in a merger (the "Merger") in
which each Company Share not acquired in the Offer, other than Company Shares
held by the Acquiror, the Company or their respective subsidiaries, would be
converted into 0.2203 of an Acquiror Share and $7.61 in cash, without interest
(the "Merger Consideration" and together with the Offer Consideration, the
"Consideration"), subject to the proration provisions of the Agreement. The
Offer and the Merger, taken together, are referred to as the "Transaction".
You have asked us whether, in our opinion, the Consideration is fair from a
financial point of view to the stockholders of the Company.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and the Acquiror that we deemed to be relevant;
(2) Reviewed publicly available analysts' forecasts with respect to the
Acquiror;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects of the
Company, as well as the amount and timing of the cost savings and related
expenses and synergies expected to result from the Transaction (the "Expected
Synergies") furnished to us by the Company;
(4) Conducted discussions with members of senior management and
representatives of the Company concerning the matters described in clauses 1, 2
and 3 above, as well as their business and prospects before and after giving
effect to the Transaction and the Expected Synergies;
(5) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain publicly
traded companies that we deemed to be relevant;
(6) Reviewed the results of operations of the Company and the Acquiror and
compared them with those of certain publicly traded companies that we deemed to
be relevant;
(7) Reviewed the terms of the Acquiror's exchange offer for ASARCO
Incorporated set forth in Amendment No. 1 to the Schedule 14D-1 filed September
22, 1999;
(8) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and legal
advisors;
(9) Reviewed the potential pro forma impact of the Transaction;
(10) Reviewed a draft dated September 29, 1999 of the Agreement; and
(11) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment of
general economic, market and monetary conditions.
2
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Acquiror. With respect to the financial forecast information and the
Expected Synergies furnished to or discussed with us by the Company, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management as to the expected
future financial performance of the Company and the Expected Synergies. In
preparing our opinion we were not provided with financial forecasts with respect
to the Acquiror other than certain publicly available analysts' earnings
forecasts which we discussed with the Company's management and on which we
relied. With respect to the financial forecast information contained in such
publicly available analysts' forecasts, we have assumed that they reflect the
best currently available estimates as to the future financial performance of the
Acquiror. We have further assumed that the Transaction will qualify as a
tax-free reorganization for U.S. federal income tax purposes. We have also
assumed that the final form of the Agreement will be substantially similar to
the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Transaction, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Transaction.
We are acting as financial advisor to the Company in connection with the
Transaction and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We have, in the past, provided
financial advisory and financing services to the Company and/or its affiliates
and may continue to do so and have received, and may receive, fees for the
rendering of such services. In addition, in the ordinary course of our business,
we may actively trade the Company Shares and other securities of the Company, as
well as the Acquiror Shares and other securities of the Acquiror, for our own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Transaction and does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote on the proposed Transaction or any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares will trade following the announcement or consummation of the
Transaction.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration is fair from a financial point of view
to the stockholders of the Company.
Very truly yours,
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX
INCORPORATED
2
