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Freeport-McMoran (FCX) To Buy Plains (PXP), Mcmoran Exploration (MMR) For $9B

 December 05, 2012 10:13 AM


(By Balaseshan) Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) said it has agreed to buy Plains Exploration & Production Co. (NYSE: PXP) and Mcmoran Exploration Co. (NYSE: MMR) for $9 billion in cash and stock.

The transactions are expected to be accretive to Freeport-McMoRan's operating cash flow. FCX said the transactions will add a high quality portfolio of assets with strong current cash flows, significant growth options and complementary exposure to markets positioned for global growth.

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Freeport will purchase Plains Exploration for about $6.9 billion in cash and stock. The per-share consideration consists of 0.6531 shares of FCX common stock and $25.00 in cash, equivalent to total consideration based on the closing price of FCX stock on December 4 of $50.00 per PXP share, representing a 39% premium to PXP's previous close.

PXP shareholders may elect to receive cash or stock consideration with the value of the cash and stock per-share consideration to be equalized at closing. Aggregate consideration to the PXP shareholders is expected to consist of about $3.4 billion in cash and about 91 million shares of FCX common stock.

FCX will buy Mcmoran for about $3.4 billion in cash, or $2.1 billion net of 36% of the MMR interests currently owned by FCX and PXP. The per-share consideration consists of $14.75 in cash and 1.15 units of a royalty trust, which will hold a 5% overriding royalty interest in future production from MMR's existing ultra-deep exploration properties.

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The cash consideration of $14.75 per share represents a premium of 74% to the MMR previous closing price. The cash portion of the transaction totals $2.1 billion, excluding payment for MMR interests currently held by FCX and PXP. The cash premium, excluding interests held by FCX and PXP, totals about $900 million.

FCX has received $9.5 billion in financing commitments from JPMorgan Chase Bank, N.A. to fund the cash portion of the merger consideration for both transactions and to repay debt outstanding under PXP's existing term loans and revolver.

FCX plans to provide a guarantee for all existing PXP bonds and PXP in turn will provide guarantees for all current and future FCX bonds and term loans. After giving effect to the transaction, estimated pro forma total debt at September 30, 2012, is about $20.0 billion, or about $16.3 billion net of cash.

The transactions are expected to close in the second quarter of 2013.

FCX is trading down 13.54% at $33.10 on Wednesday, while PXP trades 25.05% higher at $45.08. MMR is trading 78.01% higher at $15.06.

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