Analysis provided by oe Lazzaro of Theflyonthewall.com:

Phelps Dodge (NYSE: PD) has agreed to be acquired by Freeport-McMoRan Copper & Gold (NYSE: FCX) in a cash and stock deal that points to continued overall strength in the U.S.'s equity markets.

Phelps Dodge shareholders will receive $88 in cash and 0.67 shares of Freeport, an offer that translates to a roughly $126.46 per PD share.

Understandably, Phelps Dodge's share soared Monday on the news, up $26.60 to $121.61. Freeport's declined 96c to $56.45.

The Freeport / Phelps deal, along with Blackstone Group's $36B-including-debt offer for Equity Office Properties (EOP) and the Bank of America's $3.3B offer to buy U.S. Trust on Monday, are events that point to overall continued strength or "bullishness" in the U.S. equity markets. The normal state of the free enterprise system is growth, accompanied by periods of mergers and acquisitions, as executives look for ways to grow market share, increase efficiency, and deploy capital more productively. And since growth and its companion mergers almost always signals that higher profits are up ahead, Wall Street is generally gladdened by the sight of merger and acquisition activity.

Further, the Freeport Phelps Dodge merger makes a great deal of sense from an operational standpoint. Freeport will be able to diversify is gold production base while also adding Phelps' substantial sector position in copper: PD is the world's third largest copper miner.

Investment Analysis: How can one profit from the PD / FCX deal? Keep in mind that substantial risk remains, because while Freeport and Phelps have tentatively agreed to merge, the deal is not complete until it has been finalized. I.E., the deal could be called off before the closing stage.

Hence, the best way for the typical investor to benefit from Freeport / Phelps is to wait for the deal to be finalized, then buy shares of Freeport in stages, on a weekly basis. For example, if you're buying 200 shares, buy 50 shares per week; for 400 shares, 100 shares per week. This tactic will enable you to benefit from pullbacks in FCX, should they occur.

Also remember that a mining stock's performance rises and falls with commodity demand, which makes Freeport / Phelps' shares suitable only for investors who can tolerate moderate risk. It's not a stock for conservative investors. Currently, there is strong demand for copper and solid demand for gold, which bodes well for a merged FCX / PD, for the next 2-3 years.