Freeport-McMoRan Copper & Gold Inc.’s $6 billion acquisition of Plains Exploration & Production Co. can proceed after a judge refused to block a shareholder vote on the buyout.
Delaware Chancery Court Judge John Noble concluded today that disgruntled Plains investors didn’t produce enough evidence that company directors failed to properly shop the oil and natural-gas producer for the highest price to warrant stopping the deal. He also found the company’s disclosures about the buyout provided enough information to shareholders.
“The court is reasonably confident that Plains’ shareholders are fully informed and capable of voting” on the offer, Noble said in a 30-page ruling. Shareholders are scheduled to vote May 20.
Phoenix-based Freeport, the largest publicly traded copper producer, agreed to buy Houston-based Plains in December for about $50 a share in cash and stock. Some Plains shareholders argued they were being shortchanged by the offer and sued in Delaware to challenge it.
Traders betting Freeport-McMoRan would raise its bid after a drop in the mining company’s shares pushed the price of Plains stock above the offer value for several months. Freeport said earlier today it had made its “best and final” bid for the energy company. Plains closed at $45.59, 1 percent below the value of the Freeport offer.
Neither Hance Myers, a Plains spokesman, nor Eric Kinneberg, a Freeport-McMoRan spokesman, immediately returned calls and e-mails for comment on Noble’s ruling.
Lawyers for the Plains shareholders contend Plains and Freeport-McMoRan executives “concocted” the buyout for their personal benefit and the deal is “riddled with disabling conflicts” according to court filings.
James Flores, Plains chairman and chief executive officer, stands to collect more than $140 million in shares and tax benefits once the company changes hands, investors said in the filings. They also contended Plains executives failed to properly disclose financial analyses of the deal by Barclays Plc, the energy company’s financial adviser.
Plains lawyers countered that the board properly considered offers for the company and no party topped Freeport’s bid, according to court filings.
The plaintiffs failed “to establish a reasonable probability that the board’s decision-making process was inadequate or that its actions were unreasonable in the light of the circumstances,” the judge said.
“The facts show that the board went through a reasonable decision-making process and acted reasonably to maximize the sales price of Plains,” Noble said.
Institutional Shareholder Services Inc., a proxy adviser, has recommended that investors vote against the acquisition. Plains may “conservatively” be valued at $45.64 to $52.32 a share on a stand-alone basis, ISS said in a May 6 report.
The mounting investor push-back, which includes investors such as Arrowgrass Capital Partners LP, threatens the deal, Mark Hanson, a Morningstar Inc. analyst, said May 7. Arrowgrass, a London-based hedge fund started by former Deutsche Bank AG traders, said in a letter to Plains directors last week that Freeport’s bid is too low.
The cases are Rice v. Plains, CA8090, and Krieger v. McMoRan, CA8091, Delaware Chancery Court (Wilmington).