NEW YORK Freeport-McMoRan Copper & Gold Inc. has agreed to acquire Plains Exploration & Production Co. and McMoRan Exploration Co. in a $9-billion move that executives say will further long-term growth by diversifying assets.
Phoenix-based Freeport will acquire oil and gas producer Plains Exploration for $6.9 billion in cash and stock and oil and gas producer McMoRan Exploration for $3.4 billion in cash, or $2.1 billion net after taking into account Freeports and Plains Explorations current stakes in McMoRan Exploration. The deals are expected to close in the second quarter of 2013.
Freeport will acquire Plains Explorations oil and gas assets in the United States, including deepwater wells in the Gulf of Mexico; onshore production on the Eagle Ford shale in Texas; oil production facilities in California; and onshore resources in Haynesville, La.
"The oil and gas assets being acquired possess the asset quality characteristics that we seek in our mining businesslarge-scale assets with long lives, low cost and geologic potential to support growth through exploration and development," Freeport president and chief executive officer Richard Adkerson said in a statement.
The combined company expects 74 percent of its $12 billion in earnings before interest, taxes, depreciation and amortization (Ebitda) in 2013 to be generated from mining and 26 percent from oil and gas, with 48 percent combined income from U.S. operations.
"This is an add-on to the mining business, and not a diversion from the strategy that weve been on," Adkerson said during a conference call with investors to discuss the merger.
During the conference call, an investor questioned Freeports move toward non-copper assets. "We have looked at the opportunities that are available for investment in the copper business," Adkerson said. "We think this is a better opportunity for our shareholders."
Investment bank Dahlman Rose & Co. said the acquisitions were surprising considering the industrys trend toward shareholder return instead of large-scale investment.