Cramer: Freeport Deal Telegraphing Trouble?

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An astounding deal went down in the energy sector on Wednesday – astoundingly bad, according to Jim Cramer.

On Wednesday, one of the world's largest miners, Freeport McMoRan, made a massive bet on oil and gas to the tune of $9 billion through its acquisition of not one but two companies – Plains Exploration and McMoRan Exploration.

According to a New York Times report, the two transactions will create a natural resources titan worth about $60 billion, including debt, and will formally reunite Freeport with McMoRan, the oil exploration company it spun off in 1994.

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Under the terms of the deals, Freeport will pay about $6.9 billion in cash and stock for Plains. That offer consists of $25 a share in cash and 0.6531 of a Freeport share, worth about $50 a share based on Tuesday's closing prices.

Immediately shares of Freeport McMoRan tumbled as much as 13% and the cost of protecting its debt against default soared as investors slammed the deal as unnecessary and hard to justify. Read More: Freeport Makes $9 Billion Energy Bet

Jim Cramer is among the skeptics.

"It instantly re-colors the stock," Cramer explained." FCX was supposed to be the premier copper company in the world. Now it is an energy and copper company where I worry that maybe something's wrong with the copper side of the equation."

"Freeport's major overseas copper holdings are in the Democratic Republic of the Congo and Indonesia. Lately the company's had dire problems with the government of Indonesia and with the workers at its gigantic Grassberg mine."

"Plus lately the ore's become harder to pull out and is a lesser grade."

Also the acquisition changes the stock's value to pros. "Those who like copper have reached for FCX," Cramer said – but the stock is no longer just a play on metals.

"Now you are also playing U.S. deep water drilling and more. So much for that.

Also Cramer noted some 'relationship issues.'

"Billy Bob Moffat, the chairman, president and CEO of McMoran Exploration is also chairman of Freeport McMoran. He's using Freeport money and stock to buy MMR, a wildcatting company that's drilling a gigantic well, the Davy Jones, in the Gulf of Mexico, that's been disastrous so far for the company."

Cramer also noted the 'relationship issue' with Plains Exploration. "Plains owns 31.5% of McMoran and Plains ' CEO , Jim Flores, is on the board of McMoran."

Cramer said these hardly qualify as arms lengths deals. "They just doesn't seem right to me. They don't t pass the smell test," he said.

What's the bottom line?

"You have to be upset if you own FCX and the anger is justified. To me it just seems like FCX shareholders got the short end of the stick."

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