By Michael Erman
NEW YORK May 20 Freeport-McMoRan Copper & Gold
Inc took a big step on Monday in its plan to expand into
energy, when Plains Exploration & Production Co
shareholders approved the miner's $6 billion takeover deal,
sweetened by two special dividends.
The world's largest listed copper producer's bid to buy
Plains, unveiled in December, ran into strong headwinds in
recent weeks when prominent investors and proxy advisory firms
said Freeport's offer was too low.
But the companies shored up support by announcing the
dividends on Monday morning, hours before shareholders were set
to vote. The payouts will provide Plains shareholders with about
$470 million in cash and stock on top of the $6 billion deal
already on the table.
The dividends effectively increase the amount Plains
shareholders would receive by $3.65 in cash and stock, bringing
their haul in line with Freeport's original $50-a-share bid. A
decline in Freeport shares since December lowered the payoff and
Last month, copper hit its lowest in a year and a half on
weak data from China, the world's top consumer, and gold prices
have fallen, while oil and gas prices have increased. That may
have helped vindicate Freeport's strategy.
"The economics are much more favorable for Freeport then when
it was announced," said BB&T Capital Markets analyst Garrett
Nelson. "They are essentially paying the same price as when they
announced the deal, but it looks to be a modestly accretive
transaction for Freeport, versus what appeared to be a modestly
Plains shares rose more than 7 percent after the dividends
CONCERN OVER FOCUS
Freeport shocked the market late last year when it said it
would buy Plains, along with McMoRan Exploration Co as a
way to diversify as copper's prospects wane.
The deals initially drew the ire of some of Freeport's own
investors and analysts, who said that they would have preferred
the company focus its investments on mining.
Freeport plans to boost its copper sales in the next few
years by expanding existing mines, but it has said there are few
good copper assets on the market. In the broader industry, mines
are ageing, grades are declining and costs are on the rise.
Freeport's cash bid for McMoRan Exploration is not
conditional on the closing of the Plains deal. McMoRan's
shareholders are scheduled to vote on that deal on June 3.
Plains said in a statement on Monday that it would pay
stockholders a special one-time cash dividend of $3 per share
immediately before the Freeport deal closed.
Freeport said it would declare a $1-a-share stock dividend
immediately after the deal closed. It would pay the dividend to
both Freeport's current shareholders and Plains investors who
receive shares in the mining company through the transaction.
"The initial deal was $50 a share as the headline. This gets
them close to that," said King She, a special situations analyst
for Susquehanna Financial Group.
After the dividends were announced, Paulson & Co - Plains'
largest shareholder with nearly 10 percent of the oil and gas
company's shares - said it would vote in favor of the deal. It
was the first time that Paulson indicated its voting intention.
Freeport said that it plans to sell $1.5 billion of assets
from the combined company or cut capital spending.
BB&T's Nelson said the asset sales would fund the dividends:
more than $1 billion for the Freeport dividend and about $390
million for the Plains payout.
Plains shares rose 7.4 percent to close at $48.94 on the New
York Stock Exchange on Monday. Freeport shares were down 6 cents