--Approval to merge Plains Exploration oil and gas business with
miner Freeport-McMoRan
--Merger expected to close May 31
--Analysts wonder whether merger makes sense
Plains Exploration & Production Co.'s (PXP) board Monday
approved a $6.5 billion merger with Freeport-McMoRan Copper &
Gold Inc. (FCX), overcoming earlier pressure to reject the
deal.
The deal gives Freeport-McMoRan sizeable oil and natural-gas
production assets to add to its mining business. Many in the
industry questioned whether the two companies would profitably
complement each other, however, forcing Plains Exploration to
announce a special dividend of $3 a share if the deal went
through.
Plains Exploration's dividend was "understandable as pressure
had been mounting in recent weeks to vote against the deal," said
analysts with Tudor, Pickering, Holt & Co.
Freeport-McMoRan agreed in December to pay the cash-and-stock
equivalent of $50 a share for Plains Exploration, while also
unveiling plans to acquire McMoRan Exploration Co. (MMR) for $3.4
billion in cash.
Freeport-McMoRan's intentions to acquire the two oil explorers
came under fire from investors who say the tie-up is riddled with
conflicts of interest as six directors will have overlapping roles
at Freeport and McMoRan. At the same time, Freeport shares have
declined sharply since the offer was unveiled in December. But
Freeport said earlier this month it wouldn't increase its offer,
ending speculation the deal might be boosted.
Plains on Monday said the special dividend will be paid
immediately prior to the completion of its merger with
Freeport-McMoRan, which has also approved the payout.
Meanwhile, Freeport-McMoRan's board intends to declare a
supplemental $1 dividend immediately following the closing of its
Plains acquisition.
Freeport-McMoRan also said it plans to complete $1.5 billion in
asset sales from the combined company and will reduce its
capital-spending plans.
Paulson & Co. Inc., whose funds own about 9.9% of Plains
shares, said Monday that it "appreciates the flexibility of both
Plains and Freeport in adding incremental cash to the transaction,"
and will vote in favor of the merger.
Plains Exploration shares were trading 6.98% higher Monday at
$48.73 while Freeport-McMoRan shares were down 1.32% at $32.25.
Write to Ben Lefebvre at Ben.Lefebvre@dowjones.com
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