Fight for Asarco hots up

MUMBAI: The fight to take over US-based copper mining company Asarco, which had appeared to be settled in favour of Anil Agarwal-controlled Sterlite Industries, could start all over again.

In a move that might snowball into a takeover battle between the two mining giants, Grupo Mexico has suggested an all-cash $1.3-billion bid to counter Sterlite���s recent offer to buy out the assets of the ailing company for a cash-cum-deferred payment bid.
Grupo���s attorney informed the US bankruptcy court of the company���s bid, which is intended as an alternative to Sterlite���s offer of $1.1 billion in cash and $600 million in debt. The Grupo offer comes nearly a month after Asarco agreed in principle to sell its assets, including three copper mines and a smelter in Arizona, to Sterlite.

While Sterlite refused to comment officially on the issue, a senior executive said, ���The field is open for anybody to make a revival proposal. Grupo���s latest move could also likely impact the bidding process.���

Another person familiar with the development said if the US bankruptcy court finds the Grupo offer superior to Sterlite���s, the Indian firm will have the option of matching it. As of now, the Grupo offer is a preliminary one and not strictly comparable with Sterlite���s. Persons familiar with the development said Grupo could also sweeten its offer if it gets the court���s go-ahead.

Last year, Grupo made similar attempts to stall Sterlite���s proposed acquisition of Asarco���s assets for $2.6 billion.

The deal ultimately failed, as Sterlite withdrew its bid in October in the wake of falling copper prices and global meltdown. Grupo acquired Asarco in a leveraged buyout in 1999, but lost control in 2005 since the company went bankrupt, partly because of asbestos-related liabilities and a failure to pay its creditors.

Last month, Sterlite agreed to pay $1.1 billion in cash and issued a senior secured non-interest bearing promissory note for $600 million payable over a period of nine years, with the payment outgo linked to the movement of copper prices.

The staggered payment is secured against Asarco���s assets without any recourse to Sterlite. On the other hand, Grupo, which lost control of Asarco four years ago, offered to pay the entire amount in cash.

Asarco, the third-largest copper producer in US, has around five million tonnes of copper reserves and produced 235,000 tonnes of refined copper in 2007. For fiscal 2008, Asarco had total revenue of nearly $1.9 billion and profit before tax of $393 million.

The assets to be acquired by Sterlite include three open-pit copper mines and associated mills, a copper smelter in Arizona, a copper refinery and a precious metals plant in Texas. Grupo Mexico is the largest mining corporation in Mexico and the third-largest copper producer in the world.