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Rediff.com  » Business » Grupo Mexico counters Sterlite, again

Grupo Mexico counters Sterlite, again

April 15, 2009 01:46 IST
The takeover battle for United States copper miner Asarco continues to rage, as its estranged parent Grupo Mexico has offered $1.3 billion to counter Sterlite Industries' offer for the second time.

Sterlite, a Vedanta group company, may counter the offer by revising the payment pattern of its $1.7 billion offer, which includes $1.1 billion upfront cash payment and $600 million staggered over nine years, according to an executive involved in the developments.

A Grupo Mexico lawyer informed the court at Corpus Christi in Texas that the company was willing to pay $1.3 billion in cash to recover the copper miner, which filed for bankruptcy in August 2005. The all-cash offer could be sweetened with additional payouts.

Sterlite insiders say the company is keen on acquiring Asarco. The company has the support of Asarco's workers' unions, authorities and the board. If the bankruptcy court allows Grupo to offer a package, Sterlite may revise its payment pattern. A Sterlite spokesperson declined to comment.

After the crash of the commodity market, Sterlite Industries, a subsidiary of London-listed Vedanta Resources, had successfully renegotiated the acquisition price down by $900 million from the earlier offer price of $2.6 billion in March after Grupo had withdrawn its first counter bid.

Copper prices have surged to their highest since October on speculation that increased spending in China would boost demand. This year, copper has surged 51 per cent, the biggest gain among 19 raw materials in the Reuters/Jefferies commodity research bureau Index. Copper futures for May delivery rose 5.45 cents, or 2.6 per cent, to $2.1255 a pound (one pound is equal to 0.45 kilogram) on the New York Mercantile Exchange's Comex.

When Asarco filed for bankruptcy in 2005, the court and a creditors committee took control. Recovering from the pain of bankruptcy, Asarco posted a profit of $1.9 billion last year.

On May 31, 2008, Sterlite emerged as the lead bidder, with a $2.6 billion offer to buy Asarco's operating assets. But Grupo, which has vowed to fight Sterlite, proposed a $4.1 billion revival package. Asarco is suing the US subsidiary of Grupo Mexico, Southern Copper, in another case for $11.3 billion, claiming fraudulent transfer of its interest in two of the world's richest copper mines. If Grupo were to regain Asarco, it would drop the lawsuit against itself and keep full interest in Southern Copper, Asarco lawyers told a bankruptcy judge a few months earlier.

Nevin John
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