A proposed merger between copper companies Asarco and Cyprus Amax Minerals is likely to be rejected by shareholders Thursday, Wall Street analysts said.

Shareholders of the two companies already have higher counteroffers--one from number one copper company Phelps Dodge and another from Mexican copper giant Grupo Mexico, which Friday joined the fray, just topping Phelps's $1.01 billion stock-and-cash bid for Asarco by offering $1.03 billion in cash. Grupo Mexico already has a 10 percent stake in Asarco.

The Asarco-Cyprus merger would fetch Cyprus shareholders $19.50 a share, including a $5 dividend. By comparison, Phelps's twice-sweetened offer is for $9 in cash and 0.288 of its own shares (totaling about $25) for Asarco and $6.89 in cash and 0.2203 of its shares (equivalent to $19) for each share of Cyprus.

"It is becoming increasingly clear that the [Asarco-Cyprus] deal is in very serious trouble," said Kurt Billick, mining and metals analyst at Warburg Dillon Read.

Asarco and Cyprus seem to realize as much. Over the past two days, Asarco and Cyprus have issued statements saying they will explore alternatives to the two-way deal and to Grupo Mexico and Phelps's offers. "Discussions are underway in pursuit of this objective," Cyprus's statement said yesterday.

But it is unlikely that any other suitor would be interested in either Asarco or Cyprus. The reason, analysts say, is that the bidding war has already overvalued the two companies. "A lot of value has gone out of the deal," said Leo Larkin, metals analyst at S&P Equity Group.

While declining to comment on a possible bid increase, a Phelps spokesperson said the company considered the current offer prices fully valued. But if Phelps does increase the bid again, analysts say, the premium will be marginal, because the company has maintained that it does not want a merger to dilute its earnings. A higher offer would require Phelps to identify more areas of cost savings to maintain its earnings.

A bidding war could hurt Grupo Mexico, too. At the current price, the Mexican copper giant does not seem to have any problem lining up financing for its all-cash offer. At a higher price, however, it may be forced to offer a portion of its stock to Asarco shareholders.

That, in turn, will raise a sticky issue. Grupo Mexico trades on the Mexican stock exchange and not the New York Stock Exchange, so it is unclear how Asarco shareholders would react to their shares being listed on a relatively volatile exchange. "Any shareholder who wants to cash in on the upturn in the [copper] business could probably settle for a lower offer from Phelps," said Larkin of S&P.

Another reason why the deal could swing Phelps's way, Wall Street analysts say, is that a three-way Phelps-Asarco-Cyprus merger makes more strategic sense than a two-way merger between Grupo Mexico and Asarco. "There's no doubt that the rationale for a three-way deal is more compelling," said Billick of Warburg Dillon Read.

The three-way merger is expected to benefit the copper industry at large. By controlling the supply of copper into the market, Phelps would be able to make the demand and prices less volatile.

The Justice Department already has given its initial clearance to the deal.