8-KMaterial AgreementsExhibits & Filings

FREEPORT-MCMORAN INC 8-K Report, Material Agreement (Sep 23, 2010)

Filed September 23, 2010For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) has entered into a material definitive agreement to purchase $500 million of 5.75% Convertible Perpetual Preferred Stock from McMoRan Exploration Co. (MMR). This investment is structured to occur concurrently with MMR's acquisition of oil and gas properties from Plains Exploration & Production Company (PXP) and a $400 million financing transaction by MMR. The preferred stock is convertible into MMR's common stock at an initial conversion price of $16.00 per share, with an initial conversion rate of 62.5 shares of common stock per preferred share. This transaction is expected to result in FCX beneficially owning approximately 14% of MMR's outstanding common stock on a fully diluted basis. The agreement includes provisions for FCX to nominate directors to MMR's board and registration rights for the convertible preferred stock.

Key Highlights

  • 1FCX is investing $500 million in McMoRan Exploration Co. (MMR) by purchasing convertible preferred stock.
  • 2The investment is contingent on the successful closing of MMR's acquisition of oil and gas properties from Plains Exploration & Production Company (PXP) and MMR's concurrent $400 million financing.
  • 3The purchased preferred stock is convertible into MMR common stock at an initial price of $16.00 per share.
  • 4Upon closing, FCX anticipates holding approximately 14% of MMR's outstanding common stock on a fully diluted basis.
  • 5FCX will have the right to nominate directors to MMR's board of directors based on its ownership stake.
  • 6FCX will receive registration rights for the convertible securities to facilitate potential resale.
  • 7There are significant overlapping directors and officers between FCX and MMR, with the transaction negotiated by special committees.

Frequently Asked Questions

The primary purpose for FCX is to make a strategic investment of $500 million in McMoRan Exploration Co. (MMR) by acquiring convertible preferred stock. This investment is expected to result in FCX holding a significant minority stake (approximately 14%) in MMR, allowing for potential upside participation in MMR's business and operations, particularly following MMR's acquisition of PXP's oil and gas properties.

The closing of FCX's purchase of MMR's preferred stock is conditioned on the concurrent completion of MMR's acquisition of oil and gas properties from Plains Exploration & Production Company (PXP) and MMR's $400 million financing transaction. Additionally, regulatory approvals, including antitrust waiting periods, and approval from MMR's stockholders are required.

The preferred stock pays a 5.75% cumulative annual dividend and has a liquidation preference. Crucially, it is convertible into MMR common stock at an initial price of $16.00 per share. This conversion feature allows FCX to benefit from any increase in MMR's common stock value, potentially increasing its equity stake and influence over time.

FCX will gain significant influence through its ability to nominate directors to MMR's board, with the number of nominations tied to its ownership percentage (initially two directors if owning at least 75% of the initial percentage, one director if owning between 25% and 75%). This aligns with FCX's strategic interest in MMR's operations and the acquired assets.