Sterlite raises Asarco bid to $2.56 billion - Quoted in the Financial Express

Sterlite Industries raised its bid for US mining company Asarco to $2.56 billion in cash on Friday, despite a Texas bankruptcy court having already recommended in favour of rival bidder Grupo Mexico. Analysts said the higher bid might not help Sterlite in the bidding war that started in May 2008, but could bolster its legal position as this is close to its earlier offer of $ 2.6 billion negotiated in 2008.

A subsidiary of London-based Vedanta Resources Plc owned by Anil Agarwal, Sterlite informed the BSE its new bid would include full cash payment to asbestos creditors and provide for surplus cash after closing for the smooth continued operations of Asarco. “With this change, 100% of the creditors’ interest in the Southern Copper Company litigation trust will be owned by Sterlite,” the company stated. Its earlier offer was for $2.135 billion.

The latest offer is the third in two months for Sterlite. But Mexican miner Grupo Mexico has continuously challenged its bid, with the latest at $2.47 billion.

After agreeing to buy out Asarco in October 2008, Sterlite had in March this year renegotiated the acquisition price down by $900 million from the original $2.6 billion, citing falling copper prices and the global meltdown. Grupo, which joined the bidding war in June 2008, has claimed it will sue Sterlite for backing out of the offer.

PricewaterhouseCoopers principal consultant-mining Dipesh Dipu said, “This revised bid now, however, creates an interesting situation since the creditors of Asarco would be paid in full and there may still be some cash for earlier equity holders, which is Grupo itself. The bankruptcy court may need to take cognisance of this to finalise the award.” If the Asarco deal goes Vedanta’s way, it would become the third-largest copper producer in the world.

“The revision is more to do with the litigation. It seems the company intends to reduce the gap between the initial and final offer,” said a Mumbai-based analyst on condition of anonymity. Sterlite Industries shares fell on Friday by 2.71% to close at Rs 745.90 on the BSE and analysts like Morgan Stanley Research said the deal was proving costly. “Sterlite should be better off without the Asarco assets than having bought them at a price higher than $2.2 billion,” it noted in a recent report.

The Texas federal bankruptcy court ruling in favour of Grupo Mexico’s reorganisation plan for Asarco noted it was more likely to pay off Asarco’s creditors in full. The case now moves to a US district court. In its earlier offer made in August, it had offered $2.1 billion in cash and a put option for Asarco’s asbestos creditors to sell their rights in a trust set up to compensate them. The option was valued at $137 million.