Freeport-McMoRan (NYSE:FCX) has confirmed it will spin-out and float its oil and gas arm in New York.
The share sale will see Freeport-McMoRan Oil & Gas trade on the New York Stock Exchange, under the symbol FMOG.
Proceeds are said to be earmarked to fund future oil & gas growth.
Investment bank Jefferies highlights Freeport-McMoRan doesn’t believe the oil and gas assets have been fully valued, whilst part of the larger group, and the IPO could change that.
It has yet to be established how much of the listed oil and gas company will be retained by Freeport-McMoRan, however, it is confirmed that there will be a two-tier share structure.
Class A shares will be sold through the IPO, whereas Class B shares will be owned by the natural resources major. In terms of voting rights Class B shares will trump Class A by five votes to one.
“Due to the two share class structure, the parent company can retain control even if it does not retain a majority of ownership,” said Christopher LaFemina, analyst at Jefferies.
The oil and gas company is based around the assets acquired from Plains Exploration & Production and McMoRan Exploration, for US$19bn in 2013, when crude oil markets were more buoyant.
“The Brent oil price was $102/bbl when the transaction closed in June 2013. It’s $64/bbl today,” LaFemina added.
“We estimate the NPV of the oil & gas business is now just $10.4bn. Freeport has clearly bought high and is now selling low.”