Freeport-McMoRan Copper & Gold Inc. has been meeting with Plains Exploration & Production Co. shareholders to salvage support for its proposed acquisition, people with knowledge of the matter said.
Freeport Chief Executive Officer Richard Adkerson said during meetings with Plains shareholders last week that its offer is no longer “best and final,” said the people, who asked not to be identified because the process is private. Freeport has been in talks with some of the shareholders to potentially put together a new bid, the people said.
A failure to secure majority support from Plains’s shareholders could derail the biggest oil and natural gas transaction of the year. It would also thwart Freeport’s plans to expand into the more profitable oil and natural gas space in the U.S. and to mitigate the largest publicly traded copper producer’s vulnerability to metal prices.
Freeport’s stock price has dropped about 15 percent since it agreed in December to acquire Plains for $6.9 billion, or $50 a share in cash and stock at the time. Plains shareholders became increasingly outspoken about their opposition to the merger after the value dropped to less than $45 a share.
Neither Freeport spokesman Eric Kinneberg nor Plains spokesman Hance Myers responded to phone calls or e-mails seeking comment.
Freeport, based in Phoenix, rose 2 percent to $32.68 at the close in New York on May 17, valuing its bid for Plains at about $46 a share. Houston-based Plains gained about 1 percent to $45.55.
Votes that had been returned through May 17 suggested that support for the deal was in jeopardy, according to one of the people familiar with the results. Freeport, which needs a simple majority to succeed, is likely to postpone today’s voting deadline and make a new offer, the people said.
On May 9, Freeport said in a statement that it considered the agreed deal terms to be “best and final” and that it didn’t intend to increase its offer.
Arrowgrass Capital Partners LP joined CR Intrinsic Investors LLC this month in opposing the deal as the value fell. CR Intrinsic said it owns 3.8 percent of the common stock including shares underlying call options, while Arrowgrass said it owns about 4.6 million shares.
Institutional Shareholder Services, 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.
At the same time Freeport announced the takeover offer for Plains, it said it was acquiring New Orleans-based McMoRan Exploration Co., a business that was spun off from Freeport-McMoRan Inc. about 19 years ago.
Freeport shares plunged 16 percent, the most in four years, the day the offers were disclosed as shareholders punished the mining company’s return to oil and gas.