This Day On The Street
Continue to site
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

Freeport-McMoRan in a World of Debt

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FCX $4.86 -2.50%
AAPL $93.15 -1.20%
FB $99.79 -1.20%
GOOG $675.04 -1.30%
TSLA $156.49 8.90%


Chart of I:DJI
DOW 15,640.97 -273.77 -1.72%
S&P 500 1,828.03 -23.83 -1.29%
NASDAQ 4,245.2310 -38.3610 -0.90%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs