SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 28, 1997
Freeport-McMoRan Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-8124 13-3051048
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification Number)
incorporation or
organization)
1615 Poydras Street
New Orleans, Louisiana 70112
(Address of principal executive offices)
(504) 582-4000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changes since last report)
Item 5. Other Events.
On July 28, 1997, Freeport-McMoRan Inc. and IMC Global Inc. jointly
issued the following news release:
IMC GLOBAL INC. AND FREEPORT-McMoRan INC.
ANNOUNCE LETTER OF INTENT FOR MERGER;
ANNUAL G&A SAVINGS OF $33 TO $40 MILLION EXPECTED
NORTHBROOK, IL., and NEW ORLEANS, LA., July 28, 1997 -- IMC Global Inc.
(NYSE: IGL) and Freeport-McMoRan Inc. (NYSE: FTX) announced today that they have
signed a non-binding letter of intent for the merger of IGL and FTX, with IGL as
the surviving entity. The transaction will be accounted for as a purchase. In
the proposed combination, each share of common stock of FTX would be exchanged
for 0.90 shares of IGL common stock plus a warrant entitling the holder to
purchase one-third of a share of IGL common stock at a price equal to $44.50 per
share. The warrants will expire on the third anniversary of the merger.
Application will be made to list the warrants on the New York Stock Exchange.
The sulphur business and the 58.3% interest in the Main Pass Block 299 sulphur
and oil and gas operations owned by Freeport-McMoRan Resource Partners, Limited
Partnership (NYSE: FRP), together with the 25 percent interest in Main Pass 299
owned by IGL, will be transferred to a newly-formed subsidiary (Newco) of FRP,
which will distribute the Newco shares to all FRP unitholders, including FTX.
FTX will redistribute its Newco shares to its shareholders. As part of the
overall transaction, IGL will relinquish its interest in Main Pass 299 and
contribute that interest to Newco.
Mr. James R. Moffett, Chairman of FTX, Mr. Rene L. Latiolais, President and
Chief Executive Officer of FTX and FRP, both of whom will retire from FTX prior
to the merger, and Mr. Robert W. Bruce III, representing one of the largest
shareholdings of FTX common stock and a member of the Board of Directors of FTX,
will be added to the IGL Board of Directors.
In the merger with IGL, the FTX shareholders will receive the IGL shares
on a non-taxable basis. The receipt of the warrants and Newco shares may have
current tax consequences for the FTX shareholders. The distribution of Newco
shares to the FRP unitholders is expected to be largely or entirely tax-free.
On July 25, 1997, FTX's common stock closed at $26.5625 per share, and IGL's
common stock closed at $33.75 per share. The terms of the letter of intent were
approved by the Boards of Directors of both companies.
The companies expect to complete the definitive agreement in approximately
30 days. They have agreed to negotiate with each other on an exclusive basis
through August 31, 1997. Among other things, the completion of the transaction
is subject to a satisfactory due diligence review by each party, the negotiation
of the definitive agreement, approval of the definitive agreement by the Boards
of Directors of IGL and FTX, approval of the definitive agreement by the IGL and
FTX shareholders and approval under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976. The companies expect that these steps will be
completed by the end of 1997.
The merger is expected to result in an annual general and administrative
cash cost savings of at least $33 million immediately from the elimination of
FTX and FRP costs. This savings amount is expected to increase to approximately
$40 million per year in the next several years. In addition, IGL expects
additional opportunities for further cost savings from this combination.
An application will be made to list the common stock of Newco on the New York
Stock Exchange. Newco will have an 83.3% interest in the Main Pass 299 sulphur
and oil and gas operations and will be debt-free. This interest and Newco's
Culberson, Texas sulphur operations will represent total proved and probable
reserves of 68 million long tons of sulphur and 6.2 million barrels of oil as
of June 30, 1997. Newco will be the largest producer of Frasch sulphur in North
America as well as the largest marketer and transporter of sulphur in the world.
"We are extremely pleased to have reached this historic agreement in
principle with FTX and believe the merger will allow shareholders of both
companies to realize substantial benefits," said Robert E. Fowler, Jr.,
President and Chief Executive Officer of IMC Global. "This merger will
represent a major step in IMC Global's growth strategy and reaffirms our
commitment to being the world's leading, low-cost supplier of agricultural
products and services. Key among the merger's numerous benefits are a
simplified management structure for the phosphate business and considerable
cost savings. Clearly, the joining of IMC and FTX will greatly improve our
earnings potential and cash flow, as well as our ability to vigorously pursue
other growth opportunities." Fowler also noted that in today's competitive
market, "being nimble and having the ability to make decisions and move quickly
are key factors for success. This merger will greatly enhance both of these
factors."
IGL's Chief Executive further stated that, "since the transaction would
leave the Company with stronger cash flows and low leverage, IGL intends to
restructure its balance sheet to achieve a more efficient capital structure and
largely eliminate any earnings per share dilution that would otherwise occur."
Rene L. Latiolais, President and Chief Executive Officer of
Freeport-McMoRan Inc. said, "The merger of FTX and IGL provides an attractive
opportunity to save costs while focusing the company on the tremendous potential
for our combined businesses. This will allow the FTX shareholders to
participate in the growth associated with the world's largest and lowest cost
phosphate fertilizer producer, as well as benefit from participation in IMC
Global's strong position in the improving potash business and agricultural input
retail sector. FTX and IGL have been in a phosphate joint venture since
mid-1993, with IMC's share of the cash distribution increasing to 58.5% as of
July 1, 1997. This is a logical step for shareholders of both companies to
enhance their values. This is a 'win-win' for these shareholders -- FTX owners
get value and continued participation in fertilizers, while IGL gets an
increased share of a business poised for growth with impressive synergistic
savings of administrative costs in the combined entities. The significant
reduction in costs associated with administering the combined businesses is an
important factor driving improved value for the merged entity and will also
benefit FRP. The new sulphur company, Newco, to be owned by the current FTX
shareholders and FRP unitholders, will be debt-free and have significant
long-term reserves."
Mr. Latiolais also noted that "the merger of IGL and FTX will have no
effect on the previously announced proposed oil and gas exploration program and
other transactions between FRP and McMoRan Oil & Gas Co."
IMC Global is one of the world's leading producers and marketers of
phosphate and potash crop nutrients and animal feed ingredients, with fiscal
1997 revenues and EBITDA of nearly $3 billion and $500 million, respectively.
The Company also is one of the nation's leading distributors of crop nutrients,
including nitrogen, and related products through its FARMARKET and Rainbow
distribution networks. Additionally, it sells potash and other products to
industrial users, produces sulphur and oil through joint venture operations, and
markets lawn and garden products under its IMC Vigoro brand name.
Freeport-McMoRan Inc. owns a 51.6% interest in FRP, which is engaged in the
production and sale of phosphate fertilizers and animal feed ingredients as well
as the mining and sale of phosphate rock through IMC-Agrico Company, a joint
venture with IGL; the mining, transporting, terminalling and marketing of
sulphur and the exploration for, development and production of oil and gas
reserves.
Morgan Stanley & Co. Incorporated and Lazard Freres & Co. LLC are advising
IMC Global in connection with this transaction.
# # #
Item 7. Financial Statements and Exhibits.
(c) Exhibit
99.1 Letter of Intent dated July 25, 1997 between
Freeport-McMoRan Inc. and IMC Global Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FREEPORT-McMoRan INC.
By: /s/ Rene L. Latiolais
Rene L. Latiolais
President and Chief Executive Officer
(Authorized signatory and
Principal Executive Officer)
Date: August 5, 1997
FREEPORT-McMoRan Inc.
EXHIBIT INDEX
Exhibit
Number
99.1 Letter of Intent dated July 25, 1997 between Freeport-McMoRan
Inc. and IMC Global Inc.
EXHIBIT 99.1
Freeport-McMoRan Inc.
New Orleans, Louisiana
Confidential
July 25, 1997
Robert E. Fowler, Jr.
President and Chief Executive Officer
IMC Global Inc.
2100 Sanders Road
Northbrook, IL 60062-6146
Dear Bob:
Attached is a term sheet setting forth the principal terms and conditions
of our proposal for a stock merger (the "Merger") of Freeport-McMoRan Inc. and
IMC Global Inc. If you indicate your acceptance of the attached term sheet by
executing in the space provided below, this letter, together with the term
sheet, will constitute the mutual nonbinding statement of the intention of
Freeport-McMoRan Inc. and IMC Global Inc. to effect the Merger.
There will be a period commencing on the date that this letter has been
executed by you and ending on August 31, 1997, during which (i) each of the
parties will complete its due diligence and evaluation of the other party and
(ii) the parties will use their reasonable good faith efforts to negotiate a
mutually acceptable definitive agreement to effect the Merger. Except for the
obligations set forth in the foregoing sentence, neither this letter nor the
term sheet shall be deemed to be a binding agreement of the parties nor shall
such instruments create any legal obligation on behalf of Freeport-McMoRan
Inc., IMC Global Inc. or any of their respective representatives. Any such
agreement shall be created solely by a written, executed and delivered
definitive agreement.
Please confirm your acceptance of our proposal by executing two copies of
this letter and returning a fully executed copy to Freeport-McMoRan Inc. We
would intend to mutually publicly announce the proposed transaction immediately
thereafter. It is our expectation that the parties would enter into a
definitive agreement within one month after your execution and return of this
letter, that the necessary stockholders meetings will be held as soon as
practicable thereafter and that the closing will take place as soon as
practicable after such meetings.
Freeport-McMoRan Inc.
/s/Rene L. Latiolais
-------------------------
By: Rene L. Latiolais
Agreed and Accepted
this 25 day of July, 1997
IMC Global Inc.
/s/ Robert E. Fowler, Jr.
By: Robert E. Fowler, Jr.
Attachment
PROPOSAL
OF MERGER OF FREEPORT-MCMORAN INC. AND IMC GLOBAL INC.
SUMMARY OF KEY TERMS
JULY 1997
Basic Transaction: A stock-for-stock non-taxable merger (the
"Merger") of Freeport-McMoRan Inc. with IMC
Global Inc. (or one of its subsidiaries) in
a transaction accounted for as a purchase.
IMC Global Inc. will be the surviving
public company. Freeport-McMoRan Inc.
shareholders will receive 0.90 share of IMC
Global Inc. for each Freeport-McMoRan Inc.
share (the "Exchange Ratio"). In addition,
for each Freeport-McMoRan Inc. share there
will be issued a warrant entitling the
holder to acquire one-third share of IMC
Global Inc. at an exercise price equal to
$44.50 per share. Such warrants will
expire on the third anniversary of the
Merger. IMC Global Inc. will use its
reasonable good faith efforts to list the
warrants on the NYSE. In addition, prior
to consummation of the Merger, the Freeport
McMoRan Resource Partners, Limited
Partnership sulphur and Main Pass oil
business, as well as IMC Global Inc.'s
interests in the Main Pass 299 Joint
Ventures, will be contributed to a newly
formed subsidiary (Newco) of Freeport
McMoRan Resource Partners, Limited
Partnership, with the shares of Newco to be
distributed to Freeport McMoRan Resource
Partners, Limited Partnership public
unitholders and Freeport-McMoRan Inc.
shareholders. No consideration will be
paid to IMC Global Inc. for the
contribution of its Main Pass 299 Joint
Ventures interest to Newco.
Board Governance: The Board of IMC Global Inc. will be increased by
three and James Robert Moffett, Rene L. Latiolais
and one current member of the Freeport-McMoRan
Inc. Board selected by it will join the IMC
Global Inc. Board.
Management: At discretion of IMC Global Inc. Board, James
Robert Moffett and Rene L. Latiolais will retire
from Freeport-McMoRan Inc. and receive benefits
established by existing plans.
Management Stock Options
and Bonuses: 1997 Freeport-McMoRan Inc. management
bonuses under existing plans will be
protected. Value of stock options will be
preserved but transferred to IMC Global
Inc. stock. The value of Freeport-McMoRan
Inc.'s current long-term performance
incentive plan will be preserved.
Severance and other employee termination
costs of Freeport-McMoRan Inc. employees
will not be borne, directly or indirectly,
by Freeport-McMoRan Inc., IMC Global Inc.
or Freeport McMoRan Resource Partners,
Limited Partnership.
Freeport-McMoRan Inc./Freeport
McMoRan Resource Partners,
Limited Partnership G&A Savings: Current 1997 Freeport-McMoRan Inc./Freeport
McMoRan Resource Partners, Limited
Partnership G&A level is approximately
$40.5 million, not including IMC Global
Inc. allocations of approximately $18
million. Prior to closing, Freeport-McMoRan
Inc./Freeport McMoRan Resource
Partners, Limited Partnership will effect
future savings of G&A in the following
approximate amounts through absorption by
Newco, the new Sulphur/Main Pass oil
entity, employee severances, termination of
administrative services agreements with FM
Services Co. and Termination or expiration
of other Freeport-McMoRan Inc. commitments:
1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------
(in millions)
$33 34.5 36 37.5 38.5 38.5 40.5
IMC Global Inc. will be required to incur costs
for administering Freeport McMoRan Resource
Partners, Limited Partnership, which now total
approximately $1.5 million annually.
Confidentiality: Standard confidentiality terms.
"Deal Protection Provisions": Conventional mutual no shop provisions with
fiduciary outs to be included in definitive
agreement.
Other Contractual Provisions: Conventional representations & warranties,
covenants and conditions appropriate for public
company mergers to be included in definitive
agreement. Covenants applicable between signing
of a definitive agreement and closing of the
transaction will preclude out-of-the-ordinary-
course transactions such as acquisitions.
Other: Exclusive and confidential negotiation
period until August 31. Due diligence
subject to mutual confidentiality
agreements. Transaction subject to: (i)
the negotiation, Board approval, execution
and delivery of a definitive merger
agreement; (ii) approval by Freeport-McMoRan Inc.
and IMC Global Inc. stockholders; (iii) the
expiration or early termination of all applicable
waiting periods under the Hart-Scott-Rodin Act and
receipt of any necessary regulatory and
third party consents and approvals and (iv)
satisfaction or waiver of other closing
conditions specified in the written
agreement.
Proposed Timetable: Consistent with that prepared by IMC Global
Inc. in September 1996, subject to possible
adjustment to accommodate distribution of
Newco.
