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Rediff.com  » Business » New hope for Sterlite in Asarco bid

New hope for Sterlite in Asarco bid

October 21, 2009 02:26 IST
Anil Agarwal-controlled Sterlite Industries has got a leg-up in its takeover battle for bankrupt copper miner Asarco in the United States. A district court in Texas has allowed Sterlite to argue for its amended bid of $2.56 billion, which was earlier rejected by a lower court.

On Monday, rival bidder Grupo Mexico's attorney Robert Moore asked judge Andrew Hanen to reject Sterlite's amended bid for Asarco. The judge didn't agree and also said he would consider the union's objections to Grupo Mexico, and asked union representatives to attend the hearing. The judge urged Grupo to reach an agreement with its union.

Hanen said he would not immediately give control of the bankrupt miner to its estranged parent, Grupo Mexico, considering the pending financial, environmental and labour issues. He would consider a broad array of issues including complaints of the miners union, the recommendation of creditors and past performance of Grupo as the owner.

A bankruptcy court at Corpus Christi in Texas, which is lower to the district court, had backed the bid of Grupo Mexico on August 31 and twice recommended that district judge Hanen confirm the verdict. Sterlite had raised its offer price to $2.56 billion for acquiring the US copper miner, two weeks after the lower court's judgment. But judge Richard Schmidt said the offer came after the verdict and it could not be considered.

The district court is expected to take a decision on the sale by the end of this month. Sterlite sources said the district court's move would help them in presenting a better stand. Analysts felt the revised bid would give Sterlite an edge over Grupo's offer price, besides support from the labour unions of Asarco employees and the company's court-appointed management.

Earlier, the unions had threatened to halt work at the mines of Asarco, if the former parent regained control. Arizona has also witnessed a slew of workers' protests against Grupo. The representatives of local government bodies also supported Sterlite's takeover plan.

Interestingly, Judge Hanen, who is hearing the case now, had ruled last year that the Mexican company was guilty of defrauding creditors by diverting rich copper assets that Asarco owned in Peru to a different unit of Grupo Mexico. The copper miner had appealed against the verdict.

Both the bidders want to buy Asarco to gain control of the company's copper mines in Arizona. Sterlite was to originally acquire Asarco for $2.6 billion, but it lowered the offer amid the recession, citing decline in copper prices. Grupo Mexico ultimately won the bid, after it continued to raise its bids higher than Sterlite's.

Asarco owns three copper mines in Arizona. It is a 110-year-old company and had filed for bankruptcy protection in 2005, after being sued for $1.6 billion over environmental issues. For the year 2008, the company had reported total revenues of nearly $1.9 billion and profit before tax of $393 million.

Nevin John
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