This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Freeport-McMoRan in a World of Debt

Stocks in this article: FCX PXP MMR SCCO BLK

FCX, which saw its last quarterly earnings growth drop by almost 22%, moves from being a company with around $3.5 billion in total debt to now having (according to Yu) more than $16 billion. Yu reportedly said this gigantic increase in debt is manageable with some capital spending maneuvers.

Jim Cramer's protege, Dave Peltier, finds you Stocks Under $10 picks with explosive upside potential. See what he's trading today with a 14-day FREE pass.

The market reaction created an enormous amount of selling of FCX shares on over 10 times average daily volume. FCX's $1.25 annual dividend, which had represented a payout ratio of 37% of the company's earnings, is the first big question mark many investors will face.

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 Chart 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 Chart 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."

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs