Sterlite lowers bid for Asarco

Sterlite Industries, the flagship firm of Anil Agarwal promoted Vedanta Resources, has submitted a revised proposal to acquire Asarco, which is $500 million lower than its previous offer, sources close to the company said.

Sterlite submitted the revised offer of $2.1 billion to the board of the US-based mining company last week. India’s leading copper company emerged the winning bidder for Asarco with its bid of $2.6 billion in May 2008.

The Asarco board’s position on the revised bid is not clear. Two weeks earlier, when Sterlite had indicated that it might cut the purchase price, Asarco had said it would collect a $50 million break-up fee following the decision.

The two companies and Asarco’s estranged parent, Grupo Mexico SAB, were to participate in court-ordered mediation to be held on October 30 and 31, Asarco General Counsel Doug McAllister told news agencies last week. US Bankruptcy Court Judge Richard Schmidt had earlier cancelled a vote by creditors on two competing reorganisation plans for Asarco submitted by Sterlite and Grupo Mexico.

Sterlite lowered its offer following a drop in the metal prices impacted by the credit crisis and global economic slowdown.

“In the last one month, copper prices have fallen about 40 per cent. Moreover, interest rates also shot up after the financial turmoil, which prompted Sterlite to revise the valuation. The revised proposal has been fixed after considering business volumes expected from Asarco,” said sources.

A Sterlite spokesperson declined to comment on the revised offer and related developments.

The company had earlier said it would finance the Asarco acquisition through a mix of debt and existing cash resources.

Asarco was trying to sell itself to Sterlite as part of a plan to reorganise and exit bankruptcy court protection. Grupo Mexico, through its America’s Mining Corp unit, has proposed a competing $2.7 billion reorganisation plan.

But Sterlite had the support of majority of creditors and union of workers as Grupo Mexico was perceived to be responsible for pushing Asarco to the brink by taking away its lucrative mines and merging the profitable mines with Grupo’s subsidiary.

When Asarco filed for bankruptcy in 2005, the court and a creditors’ committee assumed control of the company. Labour disputes led to a four-month strike and it ended after Asarco filed for bankruptcy protection. Recovering from bankruptcy, Asarco had posted a profit of about $1.9 billion last year.

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 and keep full interest in Southern Copper, Asarco lawyers told a bankruptcy judge few months back.