Freeport-McMoRan Inc. To Sell Portion Of Its
Shares in Freeport-McMoRan Copper & Gold Inc.
Freeport-McMoRan Copper & Gold Inc. and
RTZ America Inc. and The RTZ Corporation PLC
to Establish Strategic Alliance
New Orleans, LA., March 7, 1995 -- Freeport-McMoRan Copper &
Gold Inc. (NYSE:FCX), Freeport-McMoRan Inc. (NYSE:FTX), The RTZ
Corporation PLC (RTZ) and RTZ America Inc. (RTZ America)
announced today that they have signed letters of intent whereby
RTZ America may acquire over 18% of the outstanding common equity
of FCX for up to approximately $875 million; FCX and subsidiaries
of FCX will enter into joint venture arrangements with
subsidiaries of RTZ pursuant to which RTZ's subsidiaries intend
to invest up to $850 million on exploration and development
projects on lands controlled by FCX's Indonesian subsidiaries and
RTZ will acquire 25% of FCX's Spanish smelter operations.
RTZ America will acquire from FTX approximately 21.5 million
shares of FCX Class A common stock (approximately 10.4% of the
outstanding common equity of FCX) for $450 million. FTX will
call its 6.55% Convertible Subordinated Notes (Notes), the
outstanding principal amount of which is approximately $373
million. If requested by FTX, RTZ America will make a cash
tender offer for the Notes. RTZ America will be obligated to
convert any Notes it acquires into the common stock of FTX. If
RTZ America acquires all of the Notes and exercises an option it
will receive from FTX to acquire approximately 3.5 million common
shares of FCX, after completion of FTX's previously announced
restructuring RTZ America would own approximately 12% of FTX's
common shares anticipated to be outstanding and, in the
aggregate, over 18% of the outstanding common equity of FCX. FTX
anticipates it will offer FTX common shares in exchange for its
$4.375 Convertible Exchangeable Preferred Stock. FTX's Zero
Coupon Convertible Subordinated Debentures will be redeemed for
cash.
The transaction with RTZ America would enable FTX to
distribute its FCX ownership to its shareholders pursuant to the
tax-free spin-off plan announced by FTX in May 1994. As previously
announced,in November 1994 FTX received a private letter ruling from
the Internal Revenue Service that the distribution would be a tax-free
transaction. As the total number of shares of FCX will not change as a
result of these transactions, RTZ's acquisition of FCX shares from FTX
will not result in any dilution to the current holders of FCX
Class A shares.
RTZ is expected to contribute substantial operating and
management expertise to FCX's business. Representatives of RTZ
America, in proportion to RTZ America's ownership in FCX, will be
nominated to the FCX Board of Directors. In addition, RTZ and
FCX will exchange management personnel and establish an Operating
Committee, consisting of personnel of FCX and RTZ, through which
the policies established by the Board of Directors of FCX will be
implemented and operations will be conducted.
In addition to RTZ America's acquisition of FCX stock, RTZ
and FCX have agreed to establish exploration joint ventures
involving the Contracts of Work (COWs) held by subsidiaries of
FCX, P.T. Freeport Indonesia Company (PT-FI) and a subsidiary of
Eastern Mining Company (EMC). Under the joint venture
arrangements, subsidiaries of RTZ will acquire a 40% beneficial
interest in the COW held by EMC and a 40% beneficial interest in
the portion of PT-FI's COW generally referred to as Block B which
excludes PT-FI's current operations. In addition, a subsidiary
of RTZ will acquire a 40% beneficial interest in future expansion
projects in Block A of PT-FI's COW, which is the area encompassed
by PT-FI's original COW and which includes its current
operations. Under the joint venture arrangements, RTZ and FCX
will establish an Exploration Committee to approve exploration
expenditures and subsidiaries of RTZ will pay for all further
exploration approved by the committee until RTZ has paid an
aggregate of $100 million. The parties will pay ratably in
proportion to their ownership, additional exploration costs and
the costs to develop projects mutually agreed upon in EMC's COW
area and Block B of PT-FI's COW.
For future expansion projects in Area A of PT-FI's COW,
subsidiaries of RTZ will provide up to a maximum of $750 million
for 100% of defined costs to develop such projects. RTZ will
receive 100% of incremental cash flow attributed to the expansion
projects until it has received an amount equal to the funds it
has provided plus interest based on RTZ's cost of borrowing.
Subsequently, the parties will share in incremental cash flow
ratably in proportion to their ownership. Future expansion
projects in Block A of PT-FI's COW will exclude any interest in
future production equivalent to FCX's expanded 115,000 tons per day
milling operations.
A subsidiary of RTZ will purchase a 25% interest in FCX's
Huelva, Spain copper smelter, which is currently being expanded
to 270 thousand metric tons of annual metal production. RTZ will
also acquire a 25% interest in FCX's Spanish mineral exploration
program.
James R. Moffett, Chairman and CEO of FTX and Chairman of
FCX said "This strategic combination allows two world-class
mining companies to combine their expertise in a truly
synergistic transaction that will further enhance what is now one
of the world's most successful mining and mineral exploration
companies. RTZ's operating and management expertise will assist
FCX in remaining one of the lowest cost copper operations in the
world while FCX continues to focus on its exploration
opportunities in Indonesia. RTZ's funding for FCX's Indonesian
operations will free up FCX's significant cash flow that will be
generated by its 115K expansion now being completed. In
addition, the transaction with RTZ America will provide the funds
necessary to complete the refinancing of FTX's liabilities, which
will remove the last major hurdle in FTX's restructuring
announced last May".
Robert Wilson, RTZ's Chief Executive said "We are delighted
to have this unique opportunity to participate in the future
development of Grasberg, one of the world's most remarkable
mineral resources, and in the exceptional exploration potential
of Irian Jaya. Grasberg is a large and complex operation, but
given RTZ's experience in other major open pit copper orebodies
such as Bingham Canyon, Palabora and Escondida, we anticipate
considerable mutual benefit from combining our skills in this
way. We welcome the opportunity to make a substantial investment
in the fast growing Indonesian economy. When additional reserves
are established and production is increased at Grasberg, or new
orebodies discovered, there will be excellent opportunities to
enhance the value of both companies for the benefit of our
respective shareholders."
All of these arrangements are subject to, among other
things, certain regulatory approvals and approval by the FCX
Class A common shareholders of the Plan of Merger dated February7, 1995. RTZ America's acquisition of shares in FCX is expected
to be completed by June 30, 1995.
Dates Referenced Herein and Documents Incorporated by Reference
