UPDATE: Plains Exploration to Pay $3 Special Dividend if Freeport-McMoRan Deal Closes

(Updates with comment from analyst, shareholder, share price.)

By Melodie Warner and Angel Gonzalez

Plains Exploration & Production Co.'s (PXP) board declared a special dividend of $3 a share, which is conditioned upon the oil company's completed merger with Freeport-McMoRan Copper & Gold Inc. (FCX).

The move sweetens the merger for Plains Exploration shareholders, who are scheduled to vote on the deal on Monday.

Freeport-McMoRan agreed in December to pay the cash-and-stock equivalent of $50 a share for Plains Exploration, while also unveiling plans to acquire McMoRan Exploration Co. (MMR) for $3.4 billion in cash.

The dividend is "understandable as pressure had been mounting in recent weeks to vote against the deal," said analysts with Tudor, Pickering, Holt & Co.

Freeport-McMoRan's intentions to acquire the two oil explorers came under fire from investors who say the tie-up is riddled with conflicts of interest as six directors will have overlapping roles at Freeport and McMoRan. At the same time, Freeport shares have declined sharply since the offer was unveiled in December. But Freeport said earlier this month it wouldn't increase its offer, ending speculation the deal might be boosted.

Plains on Monday said the special dividend will be paid immediately prior to the completion of its merger with Freeport-McMoRan, which has also approved the payout.

Meanwhile, Freeport-McMoRan's board intends to declare a supplemental $1 dividend immediately following the closing of its Plains acquisition.

Freeport-McMoRan also said it plans to complete $1.5 billion in asset sales from the combined company and will reduce its capital-spending plans.

Paulson & Co. Inc., whose funds own about 9.9% of Plains shares, said Monday that it "appreciates the flexibility of both Plains and Freeport in adding incremental cash to the transaction," and will vote in favor of the merger.

Plains Exploration shares were trading 6.98% higher at $48.73 while Freeport-McMoRan shares were down 1.32% at $32.25.

Write to Angel Gonzalez at [e-mail]

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