Billionaire John Paulson’s Shakeups: Sprint Nextel Corporation (S), Freeport-McMoRan Copper & Gold Inc. (FCX), Delphi Automotive PLC (DLPH)

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Paulson’s merger-arb plays

Paulson also appears to have taken an interest in the merger-arb game, buying up Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and both its acquisition targets, Plains Exploration & Production Company (NYSE:PXP) and McMoRan Exploration. Freeport-McMoRan Copper & Gold Inc. (FCX) is now Paulson’s seventh largest holding, Plains his fifteenth and McMoRan seventeenth. Freeport has been pressured after the announcement, but Plains and McMoRan are up nicely.

Freeport-McMoRan Copper & Gold Inc. (FCX) has been great at exploring and developing cooper and gold assets, and now it plans to put those skills to work in the oil and gas field. The pro forma for the “new” Freeport will still be mining heavy, with 75% of revenue from mining, but it will add more diversity to revenue, with an expected 25% from oil and gas operations.
The deal terms include Freeport paying $6.9 billion in cash and stock for Plains, where the offer consists of $25 a share in cash and 0.6531 of a Freeport share. This values Plains at around $55.35, which is about 19% higher than the stock’s current trading price. Worth noting is that Plains has an unimpressive balance sheet, with $217 million in cash, but $4.5 billion in debt. This has been in part due to its aggressive exploration and development programs.
Don’t be fooled

Billionaire John Paulson made a fortune on his subprime mortgage bet, and now he has long been actively involved in merger-arb. Related to mergers, Paulson is not a fan of the proposed MetroPC-T Mobile deal (check out Paulson’s opposition). However, he has placed his bets on the Freeport-McMoRan Copper & Gold Inc. (FCX) deal, suggesting he is confident the deal will be done and that it will indeed be a long-term positive for Freeport. Meanwhile, Paulson also appears to be positive on Sprint Nextel Corporation (NYSE:S) following the Softbank investment, and he likes the dividend play that is Cablevision, but sold off almost half his stake in Delphi Automotive PLC (NYSE:DLPH) after the company saw a large run up in its stock (check more of Paulson’s newest picks).

The article Billionaire John Paulson’s Shakeups originally appeared on Fool.com and is written by Marshall Hargrave.

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