Arrowgrass Capital Partners LLP is opposing Freeport-McMoRan Copper & Gold Inc. (FCX)’s takeover of Plains Exploration & Production Co. (PXP) after amassing a stake in the energy company, according to a person with direct knowledge of the matter.
Arrowgrass, which owns about 4.6 million Plains shares, views the Freeport proposal as too low, said the person, who asked not to be named because the process is private. Investors are scheduled to vote on the takeover on May 20. Phoenix-based Freeport agreed in December to acquire Plains and McMoRan Exploration Co. (MMR) in a $9 billion cash and stock deal.
Arrowgrass also has met recently with other large Plains shareholders such as Franklin Resources Inc. (BEN) to press them to oppose the deal, the person said. Franklin is the fourth-largest shareholder of Plains, according to data compiled by Bloomberg, with about 6.2 million shares, or a 4.8 percent stake, as of March.
A representative for Arrowgrass declined to comment. A message left for a representative of Franklin didn’t immediately respond to a request for comment. Eric Kinneberg, a spokesman for Freeport, didn’t immediately respond to phone calls or an e- mail seeking comment on Arrowgrass’s position and whether Freeport expects the deal to be approved by Plains shareholders. Hance Myers and Scott Winters, spokesmen for Houston-based Plains, didn’t immediately respond to phone messages and e-mails seeking comment.
Arrowgrass, based in London, joins fellow Plains shareholder CR Intrinsic Investors LLC in rejecting the deal. CR Intrinsic said it owns 3.8 percent of the common stock including shares underlying call options, according to a letter to the Plains board dated today.
The mounting investor push-back is threatening the deal, said Mark Hanson, an analyst at Morningstar Inc. in Chicago. CR’s rejection of the deal is symbolically powerful because the firm is not a traditional activist, he said. Plains executives also own less than 5 percent of the company.
“I could see this certainly being a rallying cry” for other investors, he said. “You’ve got two weeks, which is forever in an investment horizon.”
If shareholders reject the deal, private equity could make a play for Plains, he said.
“It is a mature, cash-flowing asset,” he said. “Private equity has certainly taken out bigger firms than this.”
Paulson & Co., the hedge fund run by billionaire John Paulson, is Plains’s biggest holder, with about a 10 percent stake, data compiled by Bloomberg show. A spokesman for Paulson declined to comment.
To contact the editor responsible for this story: Jeffrey McCracken at email@example.com