Freeport Wins Plains Approval for $6.63 Billion TakeoverJim Polson
Freeport-McMoRan Copper & Gold Inc. won approval from shareholders of Plains Exploration & Production Co. for a $6.63 billion takeover after sweetening the bid for the largest U.S. oil and natural gas purchase announced in the past year.
A majority of Plains holders voted in favor of the takeover, the companies said in a statement today, sending the shares to a more than four-year high. The vote comes after the companies earlier today offered Plains investors an additional $3 a share in the form of one-time special cash dividend plus another $1 for each share in Freeport they own after the merger closes.
The Plains acquisition is part of Phoenix-based Freeport’s $9 billion bid to expand its natural resources supply base to include oil and gas production and reduce its vulnerability to metal prices. The largest publicly traded copper producer announced plans on Dec. 5 to buy both Houston-based Plains and McMoRan Exploration Co., an energy company that was spun off in 1994.
“It adds another avenue for growth, diversifies its cash flows and increases the proportion of earnings from the U.S.,” Paulson & Co., holder of 9 million Freeport shares, said in a statement today. The hedge-fund manager is the largest shareholder in Plains and the second-largest shareholder in McMoRan, after Plains.
Investors including SAC Capital Advisors LP’s CR Intrinsic Investors and Arrowgrass Capital Partners LLP had challenged the offer after the mining company’s shares dropped on a decline in copper and gold prices. The value of the stock-and-cash deal, which was $50 a share when announced, was $46.34 as of the closing price on May 17.
Arrowgrass, which holds about 4.6 million shares in Plains, is “pleased that the Freeport board has come closer to properly acknowledging the significant value Plains brings to the merged company,” Michael Edwards, a partner at London-based hedge fund, said in response to the dividend announcement before the vote results were released.
Plains increased 7.4 percent to $48.94 at the close in New York, the highest price since September 2008. Freeport gained 0.6 percent to $32.88.
The dividends announced today effectively added $3.65 a share to the offer, Tony Robson, a London-based analyst for BMO Capital Markets, wrote in a note to clients. With the added dividend, the offer amounts to $50.12 a share at the current stock price, or a total of $6.63 billion, based on the number of shares outstanding.
The transaction is expected to close May 31, the companies said.
Shareholders of McMoRan Exploration are scheduled to vote June 3 on their takeover offer, comprised of about $2.4 billion of cash and a share of future royalties from certain assets.