Freeport McMoran and Phelps Dodge Merger Case Study by Nicky

Freeport McMoran and Phelps Dodge Merger
Looks at the impact of the merger between Freeport McMoran and Phelps Dodge on the stock price of Freeport McMoran (NYSE: FCX).
# 147651 | 1,025 words | 5 sources | APA | 2011 | US
Published on May 29, 2011 in Business (Companies) , Business (Finance, Investment and Banking) , Economics (Econometrics)


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Description:

This paper explains that the merger between Freeport McMoran and Phelps Dodge created the world's largest publicly held copper mining firm. To determine the effect of this merger on the stock price from the period between the announcement and the closing of the merger and into the period of the operational integration process , the author used the capital asset pricing model. This paper concludes that, because of a favorable investor reaction to the merger, Freeport significantly outperformed historic expectations in the months following the statement of the Phelps Dodge takeover.

Table of Contents:
Introduction
The Offer
Stock Price Data
Market Data
CAPM
Abnormal Returns
Analysis of Results

From the Paper:

"The best proxy for the risk free rate in the market is treasury securities. We will examine the rate of return on 1-year treasuries at the time of the purchase. In November 2006, the yield curve was inverted, and 2 year treasury notes were yielding 4.718%. This is the risk free rate used in the CAPM calculation. The beta was calculated to be 1.068. The market return in the period was calculated to 7.29%. Thus, the expected rate of return on this investment is 4.718 + 1.068 (7.29 - 4.178) = 8.04%."

Sample of Sources Used:

  • Press Release: Freeport-McMoran Copper & Gold to Acquire Phelps Dodge. Retrieved April 7, 2009 from http://www.fcx.com/news/2006/111906.pdf
  • Historical stock prices from Big Charts (WSJ). Retrieved April 7, 2009 from http://bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=fcx&close_date=11%2F17%2F06&x=43&y=24
  • Trounson, Andrew. (2006). Rumour Rockets Oxiana. The Australian. Retrieved April 7, 2009 from http://www.theaustralian.news.com.au/story/0,20867,20571418-643,00.html
  • Schneiderman, R.M. (2006). Atticus Capital Shopping Phelps Dodge. Forbes. Retrieved April 7, 2009 from http://www.forbes.com/2006/10/11/phelps-dodge-atticus-markets-equity-cx_rs_1011markets14.html
  • Mandaro, Laura. (2006). Copper Merger Twist: BHP Billiton Tipped as Bidder. MarketWatch. Retrieved April 7, 2009 from http://www.marketwatch.com/news/story/copper-merger-muddied-freeport-surges/story.aspx?guid={B2622BE7-E3F4-4D84-A1C2-08899768CC13}

Cite this Case Study:

APA Format

Freeport McMoran and Phelps Dodge Merger (2011, May 29) Retrieved December 10, 2023, from https://www.academon.com/case-study/freeport-mcmoran-and-phelps-dodge-merger-147651/

MLA Format

"Freeport McMoran and Phelps Dodge Merger" 29 May 2011. Web. 10 December. 2023. <https://www.academon.com/case-study/freeport-mcmoran-and-phelps-dodge-merger-147651/>

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