Summary
Freeport-McMoRan Inc. (FCX) has announced a significant event concerning its 5½% Convertible Perpetual Preferred Stock. The company has engaged in privately negotiated transactions to incentivize holders of this preferred stock to convert their holdings into FCX common stock. This initiative resulted in the conversion of approximately 385,500 shares, representing 46% of the total outstanding preferred stock, into roughly 8.3 million shares of FCX common stock. To further encourage these early conversions, FCX paid an aggregate of $1.0 million in cash to the converting shareholders. These conversions were executed under the exemption provided by Section 3(a)(9) of the Securities Act of 1933. This move is strategically timed as FCX had previously called for the redemption of its 5½% Convertible Perpetual Preferred Stock on September 21, 2009. Holders had the option to convert their preferred shares into common stock until September 18, 2009, at a conversion rate equivalent to a common stock price of approximately $46.45 per share. Given that the market value of the common stock significantly exceeded the cash redemption value ($1,000 per share), FCX anticipates that most, if not all, remaining preferred stockholders will elect to convert into common stock rather than accept the redemption price. This conversion process will reduce the outstanding preferred stock, with approximately 446,100 shares remaining after these induced conversions.
Key Highlights
- 1FCX incentivized the conversion of 46% (approximately 385,500 shares) of its outstanding 5½% Convertible Perpetual Preferred Stock into common stock.
- 2Approximately 8.3 million shares of FCX common stock were issued as a result of these conversions.
- 3FCX paid $1.0 million in cash to holders to induce these early conversions.
- 4The conversions were conducted through privately negotiated transactions and are exempt from registration under Section 3(a)(9) of the Securities Act of 1933.
- 5FCX had previously called for redemption of this preferred stock on September 21, 2009, with a $1,000 per share redemption price.
- 6The conversion price for the preferred stock into common stock was approximately $46.45 per common share.
- 7FCX expects remaining preferred stockholders to convert to common stock due to the common stock's market value exceeding the redemption value.