Call it the changing of the corporate guard. Call it fantastic or refer to it as a let's wait and see arrangement. Whatever one calls it, the marriage of copper giant Phelps Dodge and Freeport-McMoRan is far more than a footnote in history.

Freeport has bought out Phelps Dodge for $26 billion. The March 14 approval of the deal by stockholders approval creates the world's largest-ever mining merger. It also creates the largest publicly traded copper producer. That is something for the history books, even in a world where the consolidation of corporate giants is not always a top headline or the first item on the 6:00 news.

In the case of Phelps Dodge, there is a tremendous amount of Arizona history. It has been involved in Arizona copper mining for 125 years and became a major economic and political force long before Arizona was granted statehood. The company has an estimated $2.6 billion annual impact on Arizona's economy. The buy-out by Freeport is the largest-ever acquisition of an Arizona-based company. It also ends P-D's 78-year run on the New York Stock Exchange. The new company will trade under the symbol of FCX.

The transaction is seen as good for both companies, which will be officially combined on March 19, when the final touch is put on the deal.

Phelps Dodge spokesman Peter Faur said, "What is going to be created is a company that's stronger and better postured to compete globally."

He said each brings into the merger two of the world's greatest mining assets: Freeport's Grasberg gold and copper mine in Indonesia and P-D's Tenke Fungurume copper and cobalt mining project in the Democratic Republic of the Congo. The Grasberg mine is the world's largest copper and gold mine, in terms of reserves. The Grasberg property is the world's largest gold mine and world's third-largest copper mine.

As the Grasberg mine is Freeport's key asset, the merger with Phelps Dodge gives it greater diversity, Faur said.

"From the Phelps Dodge side we gain access to that property and Freeport (gains) greater access to geographical diversity," Faur said. "Together we'll be one of the largest North American-based mining companies in the world."

Along with its copper mines in the U.S. and the Congo development, P-D owns a large interest in Chilean copper production. Phelps Dodge is America's leading copper producer and its flagship Morenci mine is the nation's largest active open pit copper mine. P-D's development of a new mine near Safford is in high gear. The merger is not expected to interrupt the mine's development.

Phelps Dodge also has operations in Globe-Miami.

A March 15 news release from Freeport-Phelps Dodge said 98 percent of stockholder votes supported the merger. That no doubt caused several sighs of relief as support for the transaction was cloudy when the proposed merger was first announced in November. Among major obstacles were stockholder support and the amount of debt Freeport would have to incur to swing the deal.

The merger cleared a major hurdle in early February when P-D's largest shareholder, Atticus, a New York-based hedge fund, said it would back the deal. Atticus holds about 20 million shares of Phelps Dodge. Atticus initially remained mum, fueling speculation the deal might not float.

Phelps Dodge shareholders are to receive $88 per share in cash and .67 of a share of Freeport stock. That comes to about $126.50 a share. In November, naysayers predicted P-D stockholders would strongly reject anything less than $150 a share.

What is next?

While history is being made, the next chapter of the Phelps Dodge-Freeport wedding story could read more like a mystery novel. That is, will copper prices remain stable, allowing Freeport to more quickly pay off the $17.5 billion in debt it took on to buy P-D? Industry analysts say the new company may end up on the rocks if copper prices plunge.

Freeport is partially financing the buyout with $6 billion in junk-based bonds and $10 billion in bank loans. Junk bonds are usually unsecured and rated below investment grade.

The China factor

China is at present the world's biggest copper customer. Its housing and building boom and overall economic growth have been at the center of increased demand for copper. Will the downturn in the Chinese stock market earlier this month, which caused a sharp fall on Wall Street, be a factor in the future price of copper?

Phelps Dodge, at least, appears to be unshaken. P-D spokesman Ken Vaughn said that in a January meeting the company projected continued strong growth. "The underlying economics when addressed in January was strong."

Industry analysts have yet to forecast any immediate major decline in China's economy despite the stock market shakes.

Freeport's President and CEO Richard Adkerson apparently remains unshaken and stands by what he said early on: China's expanding economy will protect the copper market from a major downturn.

"The emergence of China is a new feature of the copper market," Adkerson said. "Copper is a metal of infrastructure development and China is building infrastructure."

If copper prices hold, currently at around $2.50 a pound, analysts say Freeport will be able to quickly pay off its debt. At existing prices, the new company will generate an estimated $6.5 billion in operating cash.

The company's headquarters will be in Phoenix, where Phelps Dodge has been anchored since 1987, after its move from New York. The company will have about 25,000 employees, 15,000 of which are from the P-D side of the family.

There are to be changes at the top, with Adkerson as CEO, but Phelps Dodge Chief Operating Officer Tim Snider and Chief Financial Officer Ramior Peru are to remain.

Phelps Dodge employs about 5,500 people in Arizona, of which 2,500 work at the Morenci mine. Some workers at Morenci have expressed concern about how the merger will affect them personally. None of those with whom The Copper Era spoke would go on the record, but the two major concerns were possible changes in job security and pensions.

It appears to be too early to gauge what changes will occur in the rank-and-file and how the new company approaches its Arizona operations. There probably will not be much of a honeymoon and Freeport will hit the ground running, with its focus on paying off debt.

According to a March 15 Arizona Republic story by reporter Max Jarman, Freeport will bring its own style of operation. Jarman reported Freeport is considered as more aggressive, entrepreneurial and risk-prone than the historically conservative Phelps Dodge.

The Republic also reported on March 11 that in the event of copper prices sinking, Adkerson said the company could pursue increased production by reopening closed mines, such as the one in Miami. It was closed in 2002 and could be restarted to boost production.

Other options to raise cash are to sell additional stock in the company or to sell assets. Adkerson decline to identify any assets that could be sold or a timeline for offering public stock.

The CEO told the Republic, "We have inherently had a greater propensity for risk at Freeport."