Plains Exploration shareholders approve Freeport-McMoRan buyout

(Photo: Flickr, Caston_Corporate)

Plains Exploration and Production Co. shareholders on Monday voted to approve global mining firm Freeport-McMoRan Copper & Gold Inc.’s buyout of the company.

A spokesman for Houston-based Plains Exploration, Hance Myers, confirmed in an email that the deal was approved.

The companies said in a joint statement after the vote that the deal is expected to close May 31.

Earlier in the day, Freeport-McMoRan’s bid to buy Plains Exploration got a boost just ahead of the key shareholder vote as it agreed to let Plains pay its investors a special $3-a-share dividend provided the combination went through.

Plains Exploration shareholders met mid-morning to consider the merger. An hour later, the meeting was recessed until the early afternoon, and then the voting results were announced.

The special dividend was clearly an attempt to sweeten the pot for Plains Exploration shareholders, some of whom have worried the initial bid announced in December 2012 was inadequate.

In a research note after the dividend announcement, Tudor, Pickering, Holt & Co. analysts said the dividend was “understandable as pressure had been mounting in recent weeks to vote against the deal.” The analysts said the offering “should smooth the path” toward a final deal as it looked like Freeport-McMoRan was trying to make Plains Exploration shareholders whole after the loss of market value in Freeport-McMoRan stock since the cash-and-stock deal was announced.

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In a statement, Houston-based Plains Exploration said if any of its stockholders had already voted against the merger, they had every right and the ability to change their vote, in order to vote in favor of the merger agreement, before the voting closed Monday.

Under the terms as originally announced, the complicated transaction was worth $9 billion. But by the end of trading that day, it was worth $8.5 billion. It called for Freeport-McMoRan Copper & Gold to acquire Plains Exploration for roughly $6.4 billion in cash and stock, and also buy McMoRan Exploration Co., an independent firm, for roughly $2.1 billion in cash, net of the 36 percent combined stake Freeport-McMoRan Copper & Gold and Plains Exploration currently own in McMoRan Exploration Co.

At closing, McMoRan Exploration Co. shareholders also will receive a distribution of units in a royalty trust that will hold a 5 percent overriding royalty interest on future production in the company’s existing shallow water ultra-deep properties.

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The value of the deal has continued to fall since it was announced. The current value of the original deal, based on Monday’s stock prices and the current number of Plains Exploration shares outstanding, is roughly $8.2 billion. Together with the dividend announced Monday, which is worth roughly $400 million to Plains Exploration shareholders, the deal’s value is $8.6 billion.

Freeport-McMoRan also would assume debt as part of the deal. At the time the acquisition was announced, the total debt of the combined companies was said to be $20 billion. It is unclear how much that will increase as a result of the special dividend.

The combined company would be based in Phoenix, which is where Freeport-McMoRan Copper & Gold currently has its corporate headquarters. It would maintain offices in Houston and New Orleans.

Executives at the world’s largest publicly traded copper producer have defended the deal as one of the few valuable opportunities Freeport-McMoRan has to take advantage of favorable financing terms and grow its business by moving into new territory and increasing its exposure to the U.S.

The deal would create a massive natural resource company with significant mineral assets, oil and gas interests and growing production capability.

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