Activist investor Carl Icahn (Trades, Portfolio) released a statement today with an update on developments with Freeport-McMoRan Inc. (FCX, Financial), a company he began targeting on Aug. 17, purchasing 88 million shares. He then boosted the stake by 13.6% on Sept. 18 to an even 100 million shares, or 9.6% of the company.
Icahn said that after several weeks of negotiations with Freeport, they came to an agreement about his company’s representation on the board. The miner of copper, gold and molybdenum saw its shares jump 9.7% to around $13 per share so far Wednesday on Icahn’s news, and are down more than 44% year to date.
At the time of his initial disclosure, Icahn said he bought Freeport shares on the belief that they were “undervalued” and that he anticipated having discussions with its management relating to the company’s “capital expenditures, executive compensation practices and capital structure, as well as curtailment of the Issuers high-cost production operations.”
The company has had five-year average annual revenue growth rates of 3.6% for revenue and 18.1% for book value. Meanwhile, EBITDA fell at an average annual rate of 13.1%. The $13.5 billion market cap company has a P/B of 0.96 and P/S near a five-year low at 0.57.
Icahn had this to say about Freeport-McMoRan Wednesday:
“ have had a number of contacts with representatives of Freeport over the past few weeks and commend the board for adopting a number of our recommendations, such as reducing the number of directors to 11 and providing us with 2 representatives on the board, as well as representation on the board of Freeport’s oil and gas subsidiary. We also believe that Freeport stockholders generally will benefit from our agreement, which restricts the ability of the company to implement a poison pill and permits our representatives to resign from the board at any time and be free of any restrictions. To preempt criticism that we were willing to accept only a small minority position on the board, I should point out that in many of the situations just over the last few years, where we accepted only small minority positions, shareholder value has been greatly enhanced. Several examples are Forest Labs (FRX), Hain Celestial (HAIN, Financial), Hologic (HOLX, Financial), Mentor Graphics, Take Two Interactive, Herbalife (HLF, Financial), eBay (EBAY, Financial), etc., etc. I could go on, but I believe the point is made. I hope and believe that we will work with Freeport’s board to enhance value as we have done with so many others in the past.”
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