Freeport-McMoRan in a World of Debt
Unless renegotiated, Freeport will pay around $50 a share in cash and stock for Plains, representing a takeover premium of nearly 39% based on the company's closing share price, according to a statement by the company made on Wednesday .
Shareholders of McMoRan stock will get $14.75 in cash and 1.15 units of a royalty trust for each share. The terms of the transactions are supposed to close by the second quarter of 2013. The following chart gives you an overview of the three companies' share price history during the past year. FCX data by YCharts
Part of the shock was how abruptly this mega-transaction was announced, and that it was at a time when FCX, the world's largest publicly traded copper company, has seen its share price performance matched by competitors like Southern Copper (SCCO) , which doesn't have the gold production and reserves that FCX has. The comparative chart below illustrates the price comparison now. FCX data by YCharts
Institutional shareholders including BlackRock (BLK) , which held 3.1% of Freeport as of Sept. 30, have blasted the way Freeport announced the deal and tried to explain it in a conference call Wednesday.
"Congratulations on making one of the worst teleconferences I've ever heard to justify a deal," was the comment reportedly made by the manager of BlackRock's $12 billion World Mining Fund, when he spoke with Freeport Chief Executive Officer Richard Adkerson on the company's conference call. "I haven't heard anything on this call that in any way justifies why these companies should be put together."
This suggests there will be plenty of explaining left to do by FCX and the possibility of a shareholder backlash that the officers and directors who announced this lofty transaction may not have been anticipating.
All shareholders can do for now is to listen and watch carefully. The after-shocks of today's momentous events, including the share price of FCX having the single biggest one-day drop since December 2008 when the company suspended its dividend, are just beginning to unfold.
At the time of publication the author had a position in FCX.This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.