Freeport-McMoRan Copper & Gold Inc agreed to buy Phelps Dodge Corp for US$25.9 billion in cash and stock in the world's biggest mining takeover.
Phelps Dodge stockholders will get US$88 in cash and 0.67 share of New Orleans-based Freeport, the companies said today in a joint statement. The deal values Phelps Dodge at US$126.46 a share, 33 percent more than its closing price on Friday.
The acquisition will make Freeport the world's largest publicly traded copper producer, overtaking BHP Billiton Ltd, and may end Phelps Dodge's battle with rebel shareholder Atticus Capital LLC.
Global mining takeovers more than doubled to US$113.7 billion this year as China's demand for raw materials drove metal prices and company profits to record levels.
"With metal prices fueling strong cash flows, and the expectation by companies that prices will stay stronger for longer, more miners would want to shore up their backdoor or acquire to add value," said Tim Barker at BT Financial Group, which manages US$54 billion of assets including mining stocks, in Sydney.
Shares of Phelps Dodge rose US$0.14 or 0.2 percent, to close at US$95.02 in New York Stock Exchange composite trading Nov. 17. The stock has risen 32 percent this year and reached a record US$101.73 on Nov. 6. Freeport rose US$1.24, or 2.2 percent, to close at US$57.40 in New York on Friday. They gained 6.7 percent this year.
Phelps Dodge Chief Executive Officer J. Steven Whisler, who plans to retire once the Freeport deal is completed, agreed to the takeover after failing this year in his bid to acquire Canadian nickel producers Falconbridge Ltd and Inco Ltd for US$40 billion. Falconbridge was acquired by Xstrata Plc, a Swiss mining company, and Brazil's Cia. Vale do Rio Doce bought Inco.
Whisler's acquisition strategy had been criticized by Atticus Capital, a New York-based hedge fund with US$11 billion in assets that is the company's largest shareholder. Atticus and its chairman, Timothy Barakett, said on Oct. 11 it had talks with potential buyers of Phelps. Barakett had said Phelps Dodge should return to shareholders more of the cash the company built up during a four-year rally in copper prices.
Phelps Dodge has paid US$1.3 billion in special dividends since the start of this month and expects to return another US$700 million to shareholders, including by stock repurchases, by the year-end.
Barakett and Phelps Dodge spokesman Peter Faur could not be reached for comment.
The price of copper, used in pipes and wires, has almost tripled since 2002 on surging demand from China, the world's fastest growing major economy. The combined company will expand its copper production by 25 percent over the next three years.
Freeport owns the Grasberg mine, the largest gold mine and second-largest copper mine, in Indonesia's Irian Jaya region.
Freeport also owns copper refineries in Indonesia and Spain.
Phelps Dodge mines for copper in the US, Chile and Peru. The company also plans to start its Tenke copper mine in the Congo.