Freeport-McMoRan Copper & Gold Inc.
) has completed its earlier-announced acquisition of Plains
Exploration & Production Company and
McMoRan Exploration Co.
). The mining giant landed definitive merger pacts to buy these
companies in late 2012.
Freeport closed its takeover of independent oil and gas company
Plains on May 31. Moreover, it wrapped up the acquisition of
exploration and production company McMoRan Exploration on June 3
following the approval of the transaction by McMoRan
The total value of the twin transaction is $19 billion including
$10 billion of debt assumed by Freeport as part of the deal, cash
consideration of $5.5 billion and 91 million Freeport shares
(worth $2.8 billion as of May 31, 2013).
The value of the Plains acquisition is roughly $16.3 billion
including the assumption of $9.7 billion of Plains debt and cash
payment of roughly $3.3 billion. Shareholders of Plains who
elected to receive Freeport shares will get shares at an exchange
ratio of roughly 1.4302 shares of Freeport stock for each Plains
Moreover, Plains shareholders who elected to receive cash will
get $46.01 in cash for each share they held in Plains. Lastly,
shareholders who did not make a valid election or did not deliver
a valid election form before the election deadline will get
around 99.5% of their merger consideration in cash (equal to
$46.01 for each Plains share and the balance of their
consideration in Freeport shares at an exchange ratio of roughly
1.4302 shares of Freeport stock for each Plains share).
For the McMoRan acquisition, Freeport will pay $14.75 per share
in cash aggregating $2.2 billion for shares it does not already
hold. McMoRan shareholders will also get 1.15 units of a royalty
trust for each share they hold.
The acquisitions represent a part of Freeport's strategy to
diversify from its bread-and-butter copper mining business. The
merger makes the combined entity a leading natural resource
conglomerate in the U.S., leveraging Freeport's industry-leading
mineral assets and the oil and gas resources of Plains and
The addition of Plains' established oil production assets and
McMoRan natural gas drilling capabilities and shallow water
ultra-deep properties provides Freeport a significant exposure to
Freeport expects the combined entity to generate operating cash
flows of roughly $9 billion and earnings before interest, taxes,
depreciation, and amortization (EBITDA) of around $12 billion in
2013. The company sees significant synergies from the
With regards to financial profile, Freeport noted that pro forma
sales for twelve months ended Dec 31, 2012, aggregated $22.7
billion with pro forma EBITDA totaling $10.5 billion. Total debt,
as of Mar 31, 2013, was roughly $20.8 billion with consolidated
cash of $4.6 billion (barring supplemental dividends paid or to
be paid aggregating $1.4 billion).
Freeport plans to use cash flows of the combined entity to pare
debt to a targeted level of $12 billion over the next three
years. Moreover, as communicated earlier, the company plans to
sale $1.5 billion of assets and cut its capital spending to
offset the cash required for the payment of supplemental
Freeport currently holds a short-term Zacks Rank #3 (Hold).
Lake Shore Gold Corp.
Hi-Crush Partners LP
) also belong to the mining industry with each retaining a Zacks
Rank #2 (Buy).
FREEPT MC COP-B (FCX): Free Stock Analysis
HI-CRUSH PTNRS (HCLP): Free Stock Analysis
LAKE SHORE GOLD (LSG): Free Stock Analysis
MCMORAN EXPLOR (MMR): Free Stock Analysis
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