Mega-Merger Monday: Two Whopping Deals

The mining and real-estate sectors spawn whopping mergers, while money and managers and banks produce smaller ones.
Stephen TaubNovember 20, 2006

At least two record-setting deals were announced in what is shaping up to be one of the biggest days for merger announcements ever.

In the first major deal, Freeport-McMoRan Sunday night agreed to acquire Phelps Dodge for $25.9 billion in cash and stock to create what the Associated Press says will become the world’s largest publicly traded copper company.

The combined company will also be the largest North American-based mining company, according to a statement from the companies. The combination occurred in the wake of a failed three-way merger attempt among Phelps Dodge, Inco, and Falconbridge in the summer to spawn metals-industry giant in one fell swoop.

“This transaction combines two leading mining companies to form a strong industry leader at a time when we see significant long-term opportunities in our industry,” said James R. Moffett, board chairman of Freeport-McMoRan Copper & Gold Inc.

In the second merger, private equity giant The Blackstone Group late Sunday evening agreed to buy Equity Office Properties Trust for about $20 billion. However, the transaction is valued at about $36 billion, which includes the assumption of $16 billion in debt.

The deal is deemed to be the largest involving a real estate investment trust (REIT). The acquisition could break the record for a leveraged buyout transaction set earlier this year when a group of private equity firms and management bought hospital operator HCA Inc. for $21.3 billion, plus $11.7 billion in debt.

The Equity Office deal is intriguing for other reasons besides size, however. The REIT’s founder, Samuel Zell, is said to be a shrewd investor in real estate as well as distressed and bankrupt assets. And his agreement to do the deal is being interpreted by some observers as evidence that the real estate market has peaked.

In another important deal announced Monday morning, The Charles Schwab Corp. said it will sell U.S. Trust, its wealth management subsidiary, to Bank of America for $3.3 billion in cash. The transaction is expected to close in the second quarter of 2007 subject to regulatory approvals.

Also, TD Bank Financial Group said it will buy the shares of TD Banknorth Inc. it currently does not own for $3.2 billion in cash. Meanwhile, on Monday The London Stock Exchange rejected the Nasdaq Stock Market’s offer to buy the more than 70 percent of the shares it doesn’t already own in a deal that would have been valued at $5.1 billion.