Freeport-McMoRan to acquire Phelps Dodge
Last Updated: Monday, November 20, 2006 | 5:20 PM ET
CBC News
Freeport-McMoRan Copper & Gold Inc. has made a friendly $25.9-billion US offer for Phelps Dodge Corp., in a bid to create the world's biggest publicly-traded copper company.
The offer — in cash and stock — was announced late Sunday.
Each Phelps Dodge share would be exchanged for $88 US in cash plus 0.67 of a common share of Freeport-McMoRan.
The companies said the bid values Phelps Dodge at $126.46 US a share.
Shares of Phelps Dodge jumped 27 per cent Monday — up $25.45 to a close of $120.47 US on the NYSE.
Analysts said the offer shows that New Orleans-based Freeport expects the copper market to remain strong. Copper prices — which have already risen more than 50 per cent this year — were marginally higher in Monday trading.
Shares of copper miners surge
The TSX mining sector surged 3.2 per cent on the Phelps Dodge news. Copper miner Aur Resources Inc. jumped $1.86 to $20.56; Inmet Mining climbed $3.77 to $54.77; Teck Cominco Ltd. rose 70 cents to $79.56.
Arizona-based Phelps Dodge is a familiar name for followers of Canadian mining companies, as it tried to take over both Inco Ltd. and Falconbridge earlier this year in what would have been the biggest takeover in Canadian history.
But that bid failed when Swiss-based Xstrata acquired Falconbridge Ltd. and Brazil's CVRD (Companhia Vale do Rio Doce of Brazil) won control of Inco.
Freeport McMoRan is perhaps best known among Canadian investors for its role in uncovering the Bre-X Minerals gold fraud back in 1997.
Freeport, which was a minority investor in the Bre-X Busang project in Indonesia, carried out its own testing of Bre-X core samples and found virtually no gold in a site that was supposed to contain one of the richest deposits in the world. Bre-X shares collapsed soon after.
So far this year, mergers and acquisition deals in the mining industry have topped $113 billion US worldwide, according to figures from Bloomberg, as soaring commodity prices drive a takeover surge.
Total worldwide merger and acquisition activity so far this year has reached a record $3 trillion US.
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