Freeport-McMoRan Copper & Gold Inc (
) on Wednesday said it struck a deal to buy Plains Exploration
& Production Co (
) and McMoRan Exploration Co (
) 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
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.
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