STERLITE UPS ASARCO BID TO $2.2B

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STERLITE Industries and Grupo Mexico continued their seemingly endless rounds of bids and counterbids for Asarco, with the Indian company matching its rival’s $2.2-billion offer for the US-based copper miner.

   India’s largest copper maker, Sterlite Industries, has said that it would guarantee any unsecured debts of Asarco that are considered legitimate by the US bankruptcy court. Grupo Mexico made the same offer three days ago.

   A person close to the development said Asarco’s attorney had informed the US court about Sterlite’s revised offer, though he declined to divulge how much the new bid would cost the Indian company. Asarco’s liabilities are nearly $3.6 billion, including a principal outstanding of $3.1 billion and interest of $500 million. The company has cash reserves of $1.4 billion. Sterlite officials declined to comment on the issue.

   Sterlite’s latest bid is $500 million higher than its original offer in March this year. The company, a part of the London-listed Vedanta group, had said it would pay $1.7 billion, including $1.1 billion of cash, to acquire the assets of Asarco in March this year. This prompted Grupo Mexico, which had acquired Asarco in a leveraged buyout but later lost board control due to bankruptcy proceedings four years ago, to launch a counter-bid.

   Under the terms of the MoU signed in March, Sterlite reserves the right to match the best offer, in case the creditors find any other bid superior. Also, Sterlite has the right to claim a break-up fee if it fails to acquire Asarco.

Creditors play a crucial role

CREDITORS play a crucial role in the battle for Asarco as the winning bidder needs their approval, in addition to the go-ahead from the bankruptcy court. The successful bid needs the support of three-fourths of creditors, of which asbestos creditors comprise a small portion.

   Asarco has around 5 million tonnes of copper reserves and produced 235,000 tonnes of refined copper in 2007.

In fiscal 2008, Asarco had revenues of nearly $1.9 billion and $393 million in profit before tax. The company filed for bankruptcy in 2005 amid more than $1 billion in environmental claims. The latest round of bids would mean that the acquisition price is inching back towards the levels of a year ago.

   Sterlite had made a $2.6-billion offer for Asarco in May 2008, but backed out of that deal in October, saying it needed a substantial reduction in price after a drop in the copper markets. That also led Grupo Mexico to reduce its offer from an earlier $2.7 billion proposal that offered full repayment to creditors.

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