Freeport-McMoRan to buy Phelps Dodge for $25.9 billion
20 Nov 2006
Mumbai:
Freeport-McMoRan Copper & Gold Inc is acquiring
much larger Phelps Dodge Corporation to create the world's
largest publicly traded copper company. Freeport will
pay $25.9 billion in cash and stock for the acquisition
- $18 billion in cash and $7.9 billion in shares.
Freeport has agreed to pay Phelps Dodge $126.46 per share
- a premium of 33 per cent to the stock's November 17
closing price. Phelps Dodge shareholders will receive
$88 per share and 0.67 of a common share of Freeport.
The offer price values Phelps Dodge at around 8 times
its 2006 earnings forecast.
The
deal, the latest in a scramble for consolidation in the
global mining industry, aims to capitalise on record high
metal prices. Copper, which set a record 53 per cent rise
at $8,800 in May, now rules around $6,765.
Freeport-McMoRan operates the Grasberg mine in Indonesia
- the world's largest copper and gold mine in terms of
reserves while Phelps Dodge operates mines in North and
South America and Africa. The combined company would produce
nearly 1.40 million tonnes of copper and a net 1.7 million
ounces of gold this year. Combined reserves would 30 million
tones of copper and 41 million ounces of gold.
Freeport has received financing commitments from JPMorgan
and Merrill Lynch have agreed to finance the deal's $18
billion cash portion.
This would leave a debt portion of $17.6 billion. The
company said it would issue 137 million shares, i.e. 38
per cent of the combined company's stock, to Phelps Dodge
shareholders.
The
boards of Freeport and Phelps Dodge have both unanimously
approved the terms of the agreement and have recommended
it to the respective shareholders for approval.
