Mining giant Freeport-McMoRan Copper & Gold Inc. (FCX - Free Report) said that McMoRan Exploration Co. will hold a special shareholders’ meeting on Jun 3, 2013, to vote on the proposed buyout of the latter by Freeport. Shareholders who held McMoRan Exploration shares at the close of business on Apr 4, 2013, are entitled to vote on the merger.
Freeport, in Dec 2012, landed definitive merger pacts to buy McMoRan Exploration and Plains Exploration & Production Company for roughly $9 billion. The move represents a part of the company’s strategy to diversify away from its bread-and-butter copper mining business.
Per the agreement, Freeport is paying $14.75 per share in cash to buy La.-based exploration and production company McMoRan Exploration. McMoRan Exploration shareholders will also get 1.15 units of a royalty trust for each share they hold.
While the total deal value is $3.4 billion, the actual cash portion of the transaction is $2.1 billion (excluding 36% interest currently owned by Freeport and Plains). The transaction is subject to approval of McMoRan Exploration shareholders and other closing conditions and is expected to consummate on Jun 3, 2013.
Freeport is also buying Tex.-based independent oil and gas company Plains for $50 per share in cash and stock. Plains shareholders have been given an option to receive cash or stock. Freeport is expected to pay $6.9 billion in cash to buy Plains. Total transaction value for the twin deals is roughly $20 billion taking into account the debt to be assumed by Freeport as part of the deal.
The merger is expected to make 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 McMoRan. The addition of Plains’ established oil production assets and McMoRan natural gas drilling capabilities and shallow water ultra-deep properties will provide Freeport a significant exposure to energy markets.
Freeport expects the combined entity to generate operating cash flows of roughly $9 billion. The company sees significant synergies from the acquisitions.
Freeport currently holds a short-term Zacks Rank #3 (Hold).
Atlatsa Resources Corporation , which also belongs to the mining industry, retains a Zacks Rank #2 (Buy).