--Approval to merge Plains Exploration oil and gas business with
miner Freeport-McMoRan
--Merger expected to close May 31
--Analysts wonder whether merger makes sense
(Updates with analyst comment in the third paragraph)
By Benjamin Lefebvre and Melodie Warner
Plains Exploration & Production Co.'s (PXP) shareholders
Monday approved a $6.5 billion merger with Freeport-McMoRan Copper
& Gold Inc. (FCX), overcoming earlier pressure to reject the
deal.
The deal gives Phoenix-based mining company Freeport-McMoRan
sizeable assets in the booming U.S. oil and natural gas production
business. But market analysts questioned whether the companies
could successfully merge two disparate businesses and wondered if
Plains Exploration shareholders sold their stakes too cheaply.
"I'm very surprised Plains Exploration shareholders approved
this," said Morningstar analyst Mark Hanson. "Freeport-MacMoRan got
Plains for a song...and (the deal) doesn't make much sense from a
combination standpoint."
Freeport-McMoRan focuses on mining precious metals in Africa,
North and South America and Indonesia. Plains Exploration, based in
Houston, is better known for producing oil and natural gas in
California, Texas, Louisiana and the U.S. Gulf of Mexico.
Possible shareholder jitters forced Plains Exploration to
sweeten the deal earlier Monday by announcing a special dividend of
$3 a share if the acquisition went through.
Plains Exploration's dividend was "understandable as pressure
had been mounting in recent weeks to vote against the deal," said
analysts with Tudor, Pickering, Holt & Co.
Freeport-McMoRan agreed in December to pay the cash-and-stock
equivalent of $50 a share for Plains Exploration, while also
unveiling plans to acquire McMoRan Exploration Co. (MMR) for $3.4
billion in cash.
Freeport-McMoRan's intentions to acquire the two oil explorers
came under fire from investors who say the tie-up is riddled with
conflicts of interest as six directors will have overlapping roles
at Freeport and McMoRan. At the same time, Freeport shares have
declined sharply since the offer was unveiled in December. But
Freeport said earlier this month it wouldn't increase its offer,
ending speculation the deal might be boosted.
Plains on Monday said the special dividend will be paid
immediately prior to the completion of its merger with
Freeport-McMoRan, which has also approved the payout.
Meanwhile, Freeport-McMoRan's board intends to declare a
supplemental $1 dividend immediately following the closing of its
Plains acquisition.
Freeport-McMoRan also said it plans to complete $1.5 billion in
asset sales from the combined company and will reduce its
capital-spending plans.
Paulson & Co., whose funds own about 9.9% of Plains shares,
said Monday that it "appreciates the flexibility of both Plains and
Freeport in adding incremental cash to the transaction," and will
vote in favor of the merger.
Plains Exploration shares were trading 6.98% higher Monday at
$48.73 while Freeport-McMoRan shares were down 1.32% at $32.25.
--Angel Gonzalez contributed to this article.
Write to Ben Lefebvre at Ben.Lefebvre@dowjones.com; Twitter:
@bjlefebvre
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