Even though it's a smaller company, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has made a $25.9 billion bid for Phelps Dodge Corp. (NYSE:PD). If the deal closes, the new entity will be the largest publicly-traded copper company worldwide.
It's certainly a nice deal for shareholders of Phelps Dodge. The offer is for about $126 per share -- a nice premium to Friday's close of $95.02.
Interestingly enough, it appears this was a fairly quick deal (about a couple weeks). Then again, for companies of this size, it is not easy to keep things confidential.
The deal means Freeport-McMoRan would be taking on a lot of debt. Then again, the debt markets are quite frothy right now. Besides, Freeport-McMoRan knows how to generate strong cash flows, which will help to pay-down the debt load.
Besides being accretive on the short-run, the long-term prospects of this deal look good as well. After all, China and India are undergoing major growth, which should mean a big need for copper. To fulfill this growing need for copper, Freeport-McMoRan needs a highly scalable global platform. And Phelps Dodge is certainly a great fit.
Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.
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