FCX / PD Merger

Freeport McMoran Copper & Gold Inc. will acquire copper giant Phelps Dodge Corp. in a $26 billion cash and stock transaction.

Related Article: [http://biz.yahoo.com/ap/061120/freeport_phelps_dodge.html?.v=14]

This is an interesting deal for the shareholders of both companies. The benefits to holders of PD are obvious as the deal is priced at a 33% premium to PD's closing price as of November 17 and the stock is currently trading up 28% as I write this. However, the deal could also be a good one for shareholders of FCX. Richard C. Adkerson, president and CEO of Freeport-McMoRan has stated that the deal will be immediately accretive in earnings and cash flow for FCX, and PD also offers the largest copper reserves in the world of any company. The deal will also enable FCX to diversify away from its dependence on the gigantic Grasberg mine in Indonesia.

Although Adkerson downplayed any possible pricing power issues arising as a result of the merger, stating that "we will be a large company, but not anything like one that will cause any concerns," I nevertheless find it significant that Copper futures were up on the news of the merger, which will create the largest copper miner in the world. I think that says something about the potential leverage the combined company may be able to bring to pricing negotiations as a supplier.

Checking in at the New York Times version of the merger, it sure looks like the NYT still has a woody for Freeport. In the NYT report about the merger, it's hard to tell whether the article is about the merger or about the environmental and human rights "contrversies" that have supposedly dogged Freeport? Or rather, about the controversies with which the New York Times has dogged Freeport? One thing is certain however: those guys at the Times need to focus more on reporting the news and less on pushing their agenda. I think they're losing their ability to distinguish between one and the other. For a company that has had some spectacular lapses in their internal controls (Jason Blair) the NYT sure can get pretty self-righteous and crusader-like about some things, the mining sector being among them.

Related Article: (you have to copy and paste the link into your web browser because the entire link won't fit if I post it as an active link)

[http://www.nytimes.com/2006/11/20/
business/worldbusiness/20deal.html]