A US bankruptcy court has rejected Sterlite Industries' bid to acquire Asarco, six months after the Indian company had signed an agreement to acquire the beleaguered US copper miner.
The bankruptcy court in Corpus Christi, Texas, recommended the offer of Grupo Mexico—the only rival of Sterlite—over the Indian company's bid. The case has been sent to US District Court Judge Andrew S. Hanen in Texas for a final decision, which is expected in four to six weeks.
A person close to the development said Sterlite does not stand a chance of acquiring the assets of Asarco. "Technically, the federal court will hear all the parties involved in the case. But in all practical purposes, Sterlite has lost the battle." The Sterlite stock slipped 3% to close at Rs 655.85 on the BSE, while Grupo Mexico's stock jumped by as much as 32% in early trade before settling to a gain of 17%.
Asarco, the US' third-largest copper producer, which filed for bankruptcy in 2005, has about 5 million tonnes of copper reserves and produced 235,000 tonnes of refined copper in 2007. It's acquisition would have boosted Sterlite's copper strengths. Sterlite, India's largest copper maker, has a stake in Zambia's Konkola Copper Mines. Sterlite had signed a memorandum of understanding in March to acquire the assets of Asarco for $1.7 billion which attracted a rival bid from Grupo Mexico, former parent of Asarco. Sterlite chairman Anil Agarwal had said at the time of signing the agreement that the Asarco acquisition was in line with the company's strategy of leveraging its existing skills to become a diversified global copper producer.
Since then, both the parties revised their bids several times. Grupo Mexico's latest offer comprised $2.2 billion in cash and a $280-million one-year note payable to asbestos creditors. On the other hand, Sterlite's latest offer was valued at $2.1 billion, including participatory note of $208 million.Grupo has been trying to regain control of Asarco ever since it lost it a decade ago. Sterlite has been chasing Asarco since last year. It had offered $2.6 billion last year to buy assets of Asarco but backtracked in the wake of meltdown in global commodity markets. Asarco also offered $2.7 billion in cash and $440 million in creditor guarantees last year to buy entire Asarco. In fiscal 2008, Asarco had revenues of nearly $1.9 billion and $393-million profit before tax. The company filed for bankruptcy in 2005 amid more than $1 billion in environmental claims.
Sterlite had signed an MoU in March to acquire Asarco assets for $1.7 billion.
This attracted a rival bid from Grupo Mexico. Since then, both have revised bids several times.
Grupo Mexico's latest offer comprised $2.2 billion in cash and a $280-million one-year note payable to asbestos creditors.
Sterlite's latest offer was valued at $2.1 billion, including participatory note of $208 million.
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