NEW YORK, March 19 Freeport-McMoRan Copper & Gold Inc. (FCX.N) on Monday completed its $25.9 billion acquisition of Phelps Dodge Corp. PD.N -- one of the most famous names in U.S. mining history -- to form the world's largest publicly traded copper company.
It immediately commenced public offerings of about 35 million common shares and 10 million shares of mandatory convertible preferred stock to help repay debt incurred in connection with the deal.
Bear Stearns meanwhile raised its investment rating of Freeport, saying the acquisition of Phelps Dodge will increase Freeport shareholders' earnings straight away.
Announcing completion of the deal, Freeport Chief Executive Officer Richard Adkerson said the new company -- to be known as Freeport-McMoRan Copper & Gold Inc. -- will have large, long-lived, geographically diverse assets and significant proven and probable reserves of copper, gold and molybdenum.
Freeport, whose only major project up to now has been the vast Grasberg gold mine in Indonesia, acquires Phelps' mines in South America and the U.S. Southwest, as well as the rich Tenke Fungurume copper and cobalt project in Democratic Congo.
"These assets will deliver significant copper volumes to an attractive market place, providing substantial cash flows that will enable us to invest in growth projects and reduce debt rapidly," Adkerson said.
Freeport is moving its corporate headquarters from New Orleans to Phoenix, Arizona, closer to Phelps' U.S. copper mines. With the acquisition, it marks the end of a name that had done business in America since before the Civil War.
Phelps Dodge began life in 1834 as a New York City-based mercantile company, trading American products to England in exchange for copper, iron, tin and other metals. The name came from founding partners Anson Phelps, a one-time saddle maker, and his son-in-law, William Dodge, a merchant in dry goods.
Their company entered mining in 1881 when it invested in the Detroit Copper Mining Co. in Morenci, Arizona, quitting the import-export business altogether in 1906.
With Monday's acquisition by Freeport McMoRan, Phelps CEO and Chairman Steven Whisler will retire after more than 30 years with the company, as will CFO Ramiro Peru.
James Moffett will continue as chairman of Freeport with Adkerson as CEO. Timothy Snider, president and chief operating officer at Phelps Dodge, has been named to the same positions at Freeport and Freeport Chief Financial Officer Kathleen Quirk continues as CFO and treasurer of the combined company.
In a research note, Bear Stearns raised Freeport's investment rating to "outperform" from "peer perform," noting Phelps' shareholders get a 32-percent premium on their shares from prior to the announcement of the deal last November.
The brokerage, which has a price target of $80 on the stock, said the company's shares represent a compelling value given the diverse asset base, strong management team and attractive growth prospects.
In early afternoon trading on the New York Stock Exchange on Monday, Freeport shares were up 40 cents at $61.11. Phelps' stock, on its last day of trading, was up 43 cents at $128.93.
Bear Stearns also increased its 2007 copper price forecast to $2.60 per pound COMEX spot from $2.40. It also raised its 2008 copper price forecast to $2.20 per pound from $2.00.
Freeport announced a public offering of about 35 million common shares and also an offering of 10 million shares of mandatory convertible preferred stock for $100.00 per share.
The company said it plans to use the net proceeds from these offerings to repay debt incurred in connection with the acquisition of Phelps Dodge.