FCX News Freeport-McMoRan Copper & Gold to Acquire Phelps Dodge, Creating the World's Largest Publicly Traded Copper Company
NEW ORLEANS & PHOENIX--(BUSINESS WIRE)--Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and Phelps Dodge
Corporation (NYSE:PD):
Geographically diverse portfolio of long-lived copper, gold and
molybdenum reserves with attractive growth profile
Pro forma company enterprise value of $37.5 billion
Meaningful financial accretion for FCXShareholders
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and Phelps Dodge
Corporation (NYSE:PD) announced today that they have signed a definitive
merger agreement under which FCX will acquire Phelps Dodge for
approximately $25.9 billion in cash and stock, creating the world’s
largest publicly traded copper company.
The combined company will be a new industry leader with large,
long-lived, geographically diverse assets and significant proven and
probable reserves of copper, gold and molybdenum. The company’s
increased scale of operations, management depth and strengthened cash
flow will provide an improved platform to capitalize on growth
opportunities in the global market.
The combined company will be the largest North American-based mining
company. The company will enjoy an excellent cost position, long reserve
life, a diversified geographic footprint, and an attractive growth
profile. FCX currently operates the world-class Grasberg mine, located
in Papua, Indonesia, which is the world’s
largest copper and gold mine in terms of reserves. Phelps Dodge has
mines in operation or under development in North and South America, and
Africa, including the world-class Tenke Fungurume development project in
the Democratic Republic of the Congo. The combined company will
represent one of the most geographically diversified portfolios of
operating, expansion and growth projects in the copper mining industry.
James R. Moffett, chairman of the board of FCX, said: “This
transaction combines two leading mining companies to form a strong
industry leader at a time when we see significant long-term
opportunities in our industry. FCX has been built through our
exploration and development capabilities, and we will focus on
aggressively pursuing opportunities in the extensive Phelps Dodge asset
portfolio.”
Richard C. Adkerson, FCX’s president and chief
executive officer, said: “This acquisition is
financially compelling for FCX shareholders, who will benefit from
significant cash flow accretion, lower cost of capital, and improved
geographic and asset diversification. The new FCX will continue to
invest in future growth opportunities with high rates of return and will
aggressively seek to reduce debt incurred in the acquisition using the
substantial free cash flow generated from the combined business.”
Adkerson continued: “Together, FCX and Phelps
Dodge will have the size, management depth and financial strength to
optimize existing operations and accelerate our growth by aggressively
pursuing promising new development projects, exploration and
acquisitions. We are enthusiastic about the addition of Phelps Dodge’s
highly regarded mining team, which will complement our existing
organization, and are delighted to welcome Phelps Dodge’s
talented team to the FCX family.”
J. Steven Whisler, chairman and chief executive officer of Phelps Dodge,
said: “This transaction provides Phelps Dodge
shareholders a significant premium for their shares and gives them the
opportunity to participate in the upside potential of a geographically
diversified industry leader possessing the scale and asset quality to
compete on the global stage successfully. I believe our management team,
with its industry-recognized reputation for operational excellence and
technological innovation, possesses the skills in open pit and
underground mining and mineral processing to add value to FCX’s
operations. We look forward to working with FCX to realize all of the
benefits of this combination, and its exciting portfolio of growth and
expansion projects, for our shareholders, customers, employees and
suppliers.”
TERMS OF THE TRANSACTION
Under the terms of the transaction, FCX will acquire all of the
outstanding common shares of Phelps Dodge for a combination of cash and
common shares of FCX for a total consideration of $126.46 per Phelps
Dodge share, based on the closing price of FCX stock on November 17,
2006. Each Phelps Dodge shareholder would receive $88.00 per share in
cash plus 0.67 common shares of FCX. This represents a premium of 33
percent to Phelps Dodge’s closing price on
November 17, 2006, and 29 percent to its one-month average price at that
date.
The cash portion of $18 billion represents approximately 70 percent of
the total consideration. In addition, FCX would deliver a total of 137
million shares to Phelps Dodge shareholders, resulting in Phelps Dodge
shareholders owning approximately 38 percent of the combined company on
a fully diluted basis.
The boards of directors of FCX and Phelps Dodge have each unanimously
approved the terms of the agreement and have recommended that their
shareholders approve the transaction. The transaction is subject to the
approval of the shareholders of FCX and Phelps Dodge, receipt of
regulatory approvals and customary closing conditions. The transaction
is expected to close at the end of the first quarter of 2007.
FCX has received financing commitments from JPMorgan and Merrill Lynch
to fund the cash required to complete the transaction. After giving
effect to the transaction, estimated pro forma total debt at December
31, 2006, would be approximately $17.6 billion, or approximately $15
billion net of cash.
COMBINED FINANCIALS AND PRODUCTION
For the 12-month period ending September 30, 2006, the companies had
combined revenues of $16.6 billion, EBITDA (operating income before
depreciation, depletion and amortization) of $7.0 billion, and operating
cash flows of $5.5 billion. For the year 2006, the combined company’s
estimated EBITDA would approximate $7.9 billion and operating cash flows
would approximate $6.5 billion.
On a pro forma basis for 2006, the combined company’s
production would approximate 3.7 billion pounds of copper (3.1 billion
pounds net of minority interests), 1.8 million ounces of gold (1.7
million ounces net of minority interests) and 69 million pounds of
molybdenum. Combined proven and probable reserves at December 31, 2005,
would approximate 75 billion pounds of copper, 41 million ounces of gold
and 1.9 billion pounds of molybdenum, net of minority interests.
BENEFITS OF THE TRANSACTION:
The combined company is well-positioned to benefit from the positive
copper market at a time when there is a scarcity of large-scale copper
development projects combined with strong global demand for copper.
The combined company’s copper production
growth is expected to be approximately 25 percent over the next three
years.
The combined company will benefit from long-lived reserves totaling 75
billion pounds of copper, 41 million ounces of gold and 1.9 billion
pounds of molybdenum, net of minority interests.
The combined company is expected to generate strong cash flows,
enabling significant debt reduction. For the year 2006, the two
companies are expected to generate estimated combined operating cash
flows totaling $6.5 billion.
FCX expects the transaction to be immediately accretive to FCX’s
earnings and cash flow.
The combined company’s project pipeline
will support industry-leading growth by delivering nearly 1 billion
pounds of additional copper production capacity over the next three
years. Projects include Phelps Dodge’s
recent commissioning of the $850 million expansion of the Cerro Verde
mine in Peru; the development of the new $550 million Safford mine in
Arizona; a potential project to extend the life of El Abra through
sulfide leaching; the exciting Tenke Fungurume copper/cobalt project
in the Democratic Republic of the Congo, which is expected to begin
production by 2009; the expansion of FCX’s
DOZ underground mine in Indonesia; and other developments of FCX’s
large-scale, high-grade underground ore bodies in the Grasberg
district in Indonesia.
The combined company will have significant high potential exploration
rights in copper regions around the world, including FCX’s
existing prospective acreage in Papua, Indonesia, and Phelps Dodge’s
opportunities at its Tenke concession, the U.S. and South America, as
well as Phelps Dodge’s portfolio of
exciting exploration targets. FCX will continue its longstanding focus
on adding value through exploration.
The combination of FCX’s and Phelps Dodge’s
proven management and best practices in open pit and underground
mining will facilitate the sharing of expertise to optimize operations
across the asset base. Phelps Dodge’s
unique mining and processing technology provides opportunities to be
applied to optimize metal production at Grasberg.
MANAGEMENT TEAM AND BOARD OF DIRECTORS
James R. Moffett, chairman of FCX, will continue as chairman. Richard C.
Adkerson, chief executive officer of FCX, will serve as chief executive
officer of the combined company. Upon completion of the transaction, J.
Steven Whisler, chairman and chief executive officer of Phelps Dodge, is
expected to retire after more than 30 years of service to Phelps Dodge.
Timothy R. Snider will be chief operating officer of the combined
company, Ramiro G. Peru will be chief financial officer and Kathleen L.
Quirk will be chief investment officer. Mark J. Johnson will continue as
chief operating officer of FCX’s Indonesian
operations and Michael J. Arnold will continue in his executive
management role, including serving as chief financial and administrative
officer of FCX’s Indonesian operations.
At closing, FCX will add to its board of directors three independent
members from Phelps Dodge’s board, increasing
the size of the board to sixteen directors in total.
The parent company will retain the Freeport-McMoRan Copper & Gold Inc.
name and trade on the New York Stock Exchange under the symbol “FCX.”
The Phelps Dodge name will continue to be used in its existing
operations. The corporate headquarters of the combined company will be
located in Phoenix, Arizona and FCX will maintain its New Orleans,
Louisiana, office for accounting and administrative functions for its
Indonesian operations.
FINANCIAL POLICY
FCX has an established financial policy of maintaining a strong
financial position and returning excess cash to shareholders through
dividends and share purchases. The continuation of positive copper
markets would provide substantial cash flows to enable the combined
company to achieve significant near-term debt reductions. In addition,
FCX intends to consider opportunities over time to reduce debt further
through issuances of equity and equity-linked securities and possibly
through asset sales. FCX expects to continue its regular annual common
dividend of $1.25 per share. FCX is committed to its long-standing
tradition of maximizing value for shareholders.
WEBCAST INFORMATION
Management of FCX and Phelps Dodge will host a webcast for investors at
8:30 a.m. eastern time, Monday, November 20, 2006, to discuss the
details of the transaction. The webcast can be accessed at www.fcx.com
or www.phelpsdodge.com.
ADVISORS AND COUNSEL
FCX is being advised by J.P. Morgan Securities Inc. and Merrill Lynch &
Co. FCX’s legal advisors are Davis Polk &
Wardwell and Jones, Walker, Waechter, Poitevent, Carrère
& Denègre L.L.P. Phelps Dodge is being
advised by Citigroup Corporate and Investment Banking and Morgan Stanley
& Co. Incorporated, and its legal counsel is Debevoise & Plimpton LLP.
ABOUT FREEPORT-MCMORAN COPPER & GOLD
Freeport-McMoRan explores for, develops, mines and processes ore
containing copper, gold and silver in Indonesia, and smelts and refines
copper concentrates in Spain and Indonesia. Additional information on
Freeport-McMoRan is available on our web site, www.fcx.com.
ABOUT PHELPS DODGE
Phelps Dodge is one of the world’s leading
producers of copper and molybdenum and is the largest producer of
molybdenum-based chemicals and continuous-cast copper rod. The company
employs 15,000 people worldwide.
This document contains certain forward-looking statements about FCX
and Phelps Dodge.When used in this document, the words “anticipates”,
“may”, “can”,
“believes”, “expects”,
“projects”, “intends”,
“likely”, “will”,
“to be” and any
similar expressions and any other statements that are not historical
facts, in each case as they relate to FCX or Phelps Dodge, the
management of either such company or the transaction are intended to
identify those assertions as forward-looking statements.In
making any of those statements, the person making them believes that its
expectations are based on reasonable assumptions.However, any
such statement may be influenced by factors that could cause actual
outcomes and results to be materially different from those projected or
anticipated.These forward-looking statements are subject to
numerous risks and uncertainties.There are various important
factors that could cause actual results to differ materially from those
in any such forward-looking statements, many of which are beyond the
control of FCX and Phelps Dodge, including macroeconomic conditions and
general industry conditions such as the competitive environment of the
mining industry, unanticipated mining, milling and other processing
problems, accidents that lead to personal injury or property damage,
persistent commodity price reductions, changes in political, social or
economic circumstances in areas where FCX and Phelps Dodge operate,
variances in ore grades, labor relations, adverse weather conditions,
the speculative nature of mineral exploration, fluctuations in interest
rates and other adverse financial market conditions, regulatory and
litigation matters and risks, changes in tax and other laws, the risk
that a condition to closing of the transaction may not be satisfied, the
risk that a regulatory approval that may be required for the transaction
is not obtained or is obtained subject to conditions that are not
anticipated and other risks to consummation of the transaction. The
actual results or performance by FCX or Phelps Dodge, and issues
relating to the transaction, could differ materially from those
expressed in, or implied by, any forward-looking statements relating to
those matters.Accordingly, no assurances can be given that any
of the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what impact they will have
on the results of operations or financial condition of FCX or Phelps
Dodge, the combined company or the transaction.Except as
required by law, we are under no obligation, and expressly disclaim any
obligation, to update, alter or otherwise revise any forward-looking
statement, whether written or oral, that may be made from time to time,
whether as a result of new information, future events or otherwise.
Important Information for Investors and Stockholders
FCX and Phelps Dodge will file a joint proxy statement/prospectus
with the SEC in connection with the proposed merger.FCX and
Phelps Dodge urge investors and stockholders to read the joint proxy
statement/prospectus when it becomes available and any other relevant
documents filed by either party with the SEC because they will contain
important information.
Investors and stockholders will be able to obtain the joint proxy
statement / prospectus and other documents filed with the SEC free of
charge at the website maintained by the SEC at www.sec.gov.
In addition, documents filed with the SEC by FCX will be available free
of charge on the investor relations portion of the FCX website at http://www.fcx.com.Documents filed with the SEC by Phelps Dodge will be available free
of charge on the investor relations portion of the Phelps Dodge website
at www.phelpsdodge.com.
FCX, and certain of its directors and executive officers are
participants in the solicitation of proxies from the stockholders of FCX
in connection with the merger.Information concerning the
interests of FCX’s directors and executive
officers in FCX is set forth in the proxy statement for FCX’s
2006 annual meeting of stockholders, which was filed with the SEC on
March 22, 2006.Phelps Dodge, and certain of its directors and
executive officers may be deemed to be participants in the solicitation
of proxies from its shareholders in connection with the merger.Information
concerning the interests of Phelps Dodge’s
directors and executive officers in Phelps Dodge is set forth in the
proxy statement for Phelps Dodge’s 2006
annual meeting of shareholders, which was filed with the SEC on April
13, 2006.
Other information regarding the direct and indirect interests, by
security holdings or otherwise, of the participants will be described in
the definitive joint proxy statement/prospectus relating to the merger.Investors and stockholders can obtain more detailed information
regarding the direct and indirect interests of FCX’s
and Phelps Dodge’s directors and executive
officers in the merger by reading the definitive joint proxy
statement/prospectus when it becomes available.
