Market Chatter: Freeport Makes $9 Bln Energy Bet; Wall Street Pans Deal

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Freeport-McMoRan Copper & Gold Inc ( FCX ) on Wednesday said it struck a deal to buy Plains Exploration & Production Co ( PXP ) and McMoRan Exploration Co ( MMR ) for a total of $9 billion in a bold bid to diversify into the U.S. energy sector, Reuters reported.

But Freeport's shares tumbled 14% to near 52 week lows and the cost of protecting its debt against default soared as investors and analysts slammed the move as unnecessary. A managing director at one of the company's top-five shareholders said management had done nothing to justify the combination.

On paper the deal reshapes Freeport, which is one of the world's largest copper miners and is concentrated outside the United States. Plains and McMoRan are concentrated in energy plays in California, Texas and the Gulf of Mexico. About a quarter of the combined company's 2013 operating earnings would come from oil and gas.

Freeport is paying a premium of 39% for Plains and 74% for McMoRan, based on their closing stock prices on Tuesday, for the chance to explore new opportunities, given the difficulty in finding and developing attractive copper assets.

"I haven't heard anything on this call that in any way justifies why these companies should be put together," Evy Hambro, a managing director at BlackRock, said in the most pointed comments on a contentious conference call.

Units of BlackRock control 6.4% of Freeport, according to Thomson Reuters data.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities
Referenced Symbols: FCX , MMR , PXP

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