January 15, 2015 / 5:16 PM / in 4 years

UPDATE 2-Freeport-McMoRan in $137.5 mln settlement over purchases

(Adds details from regulatory filing)

By Jonathan Stempel

Jan 15 (Reuters) - Freeport-McMoRan Inc agreed on Thursday to pay $137.5 million to resolve a lawsuit claiming executives and directors had conflicts of interest that caused the natural resources company to overpay significantly for two oil and gas companies in 2013.

The accord resolves shareholder derivative litigation over Freeport’s purchases of Plains Exploration & Production Co and McMoRan Exploration Co for roughly $9 billion.

Shareholders led by a group of pension funds and union-owned Amalgamated Bank will receive settlement funds, net of unspecified legal fees and other costs, as a special dividend.

Freeport also agreed to take steps to ensure director independence, including appointing a lead independent director, and limit “golden parachutes” to departing executives in future acquisitions.

A Delaware Chancery Court judge will consider approval of the settlement at a March 16 hearing.

In a regulatory filing, Freeport said its insurers will cover $115 million of the payout under its director and officer liability policies, with the remainder funded by the Phoenix-based company.

Freeport also said the individual defendants denied wrongdoing, and did not breach their duties to shareholders.

A derivative lawsuit is where shareholders sue officials on behalf of a company.

Thursday’s settlement is unusual because the sums being paid are going to shareholders, not to Freeport itself.

“It’s a very big deal,” said Stuart Grant, a partner at Grant & Eisenhofer representing the plaintiffs, in a telephone interview. “Shareholders are getting cash in their hands. Whether this will be used as a model for future derivative litigation, only time will tell.”

Known at the time as Freeport-McMoRan Copper & Gold, Freeport agreed in December 2012 to pay $6.9 billion in cash and stock for Plains, and $2.1 billion in cash for McMoRan.

Shareholders said the transactions were tainted because the companies had overlapping directors and ownership stakes.

They also said the transactions were intended to bail out McMoRan, whose largest individual shareholder James Moffett was its chief executive and also Freeport’s chairman, and whose largest shareholder Plains could veto a sale.

Plains Chief Executive James Flores was also a McMoRan director.

Freeport shares fell nearly 20 percent in the two days before the transactions were announced. They now trade at 52 percent below where they were before the announcement.

Thursday’s settlement does not release shareholder claims against Credit Suisse Group AG, which had been Freeport’s financial adviser.

“The plaintiffs’ allegations misinterpret basic principles of buy-side valuation and Credit Suisse rejects any suggestion that we acted improperly,” said Drew Benson, a spokesman for the Swiss bank.

The case is In re: Freeport-McMoRan Copper & Gold Inc Derivative Litigation, Delaware Chancery Court, No. 8145. (Reporting by Jonathan Stempel in New York; Editing by Jeffrey Benkoe, Tom Brown and Andre Grenon)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below